GM prepares for Monday bankruptcy filing

DETROIT (Reuters) – General Motors Corp and the U.S. government finalized plans for the battered company to reorganize, setting the stage for America's largest-ever industrial bankruptcy filing before markets open on Monday.

Heralding a new and uncertain era for the No. 1 U.S. automaker, GM will file for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court in the Southern District of New York before the start of trading, according to sources with direct knowledge of the preparations.

Government support for GM is expected to total up to $60 billion. Nearly half of that money has already been extended this year in emergency aid.

President Barack Obama plans to speak on the auto industry at 11:55 a.m EDT (1555 GMT) on Monday, according to his official schedule, as the federal government prepares to take a majority stake in the once-mighty company.

After Obama's remarks, GM Chief Executive Fritz Henderson is due to hold a news conference at the offices of the New York law firm that handled the Lehman Brothers bankruptcy.

The bankruptcy is the most carefully orchestrated Chapter 11 filing in the history of American business.

GM's final descent to the courthouse started with the Bush administration's emergency aid announcement on December 19 and accelerated in late March when the Obama government gave it 60 days to clinch concessions with unions and other creditors.

The governments of Canada and Ontario are expected to take an equity or debt position in a restructured GM. The Canadian government said Prime Minister Stephen Harper and Industry Minister Tony Clement would make a joint announcement with Ontario's premier in Toronto on Monday at 1 p.m. EDT.

NEW AND OLD

GM is expected to seek a quick sale process in bankruptcy court that would allow a much smaller automaker to emerge swiftly from protection, while assets of the "old" GM are sold or closed over a longer period of time.

The 100-year-old automaker has cleared a major hurdle to a smooth passage through bankruptcy with support from investors representing 54 percent of bondholder debt, but questions remained about GM's ability to return to viability.

U.S. auto sales for May are expected to offer little hope for a short-term recovery for the industry.

No. 3 U.S. automaker Chrysler LLC is nearing the end of a court-supervised restructuring in New York to cut debt and non-performing assets, as well as consummate an alliance with Italy's Fiat SpA.

Gaining bondholder support for a bankruptcy sale process that would swap their $27 billion of debt for up to 25 percent ownership in a reorganized GM was aimed at achieving a smoother ride through the courts.

According to a spokesman for an ad hoc committee of bondholders holding about 20 percent of GM's bonds, 54 percent of debt holders supported the proposal.

GM said on Sunday the Treasury had informed the automaker that the support of more than 54 percent of the bondholders allowed it to proceed with its proposed bankruptcy process.

The support of the bondholders does not ensure court approval but gives the company an important symbolic victory that bankruptcy experts and analysts say will help GM's case.

"The warrants and the improved capital structure make for an improved recovery for bondholders," Barclays Capital analyst Brian Johnson said. "In terms of the bankruptcy process, we expect the likely bondholder assent to smooth the process."

Obama said in an interview with NBC aired over the weekend that the government was forced to take over GM in order to prevent a collapse that could have brought down other companies and further batter the recession-hit U.S. economy.

"My preference would have been to stay out of it completely," Obama said.

In the past week, GM has also concluded an amended agreement with the United Auto Workers union under which the UAW will receive a 17.5 percent in a restructured company instead of $20 billion in cash.

The UAW also made concessions that some say mark a fresh blow to the once common, well-paid manufacturing jobs that created America's middle class.

SALES AT DECADES LOW

With a bankruptcy filing seen just hours away, questions now turn to the potential impact on GM's sales, whether the proceedings could get bogged down, and whether government involvement will help the automaker overcome its core problem -- making and marketing better cars.

U.S. auto sales are already at their lowest level in decades. May sales figures are due on June 2, and expectations are that while dealerships performed better than in April, automakers are likely to report steep declines that reflect the U.S. economic slump.

GM has been losing market share since the early 1980s when it commanded 45 percent of the U.S. market. It has been hurt by its reliance on a truck-dominated vehicle line-up and by a plunge in demand as credit tightened in 2008.

GM's stock fell below $1.00 on Friday to a level last seen during the Great Depression. The stock closed at 75 cents on what is expected to be its last trading day before bankruptcy.

Shareholders are expected to recover nothing from the bankruptcy.

(Additional reporting by David Bailey, Soyoung Kim, John Crawley, Walden Siew and Tom Hals; Editing by Ted Kerr)

GM prepares for Monday bankruptcy filing

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Elan in talks to sell minority stake: report

CHICAGO (Reuters) – Irish biotech firm Elan Corp (ELN.I) is in late-stage talks to sell a minority stake to Bristol-Myers Squibb Co (BMY.N), a deal that could be a precursor to a full takeover of Elan, the Wall Street Journal reported on Saturday.

Bristol-Myers is one of two serious contenders for an Elan stake that could also include board representation and an ability to take control of the company later, the Journal said, citing a person familiar with the matter.

Spokespersons for Bristol-Myers and Elan declined to comment.

The Journal said a deal could be reached as early as next week, though the talks could still break down. It did not identify the other contender.

Elan hired Citigroup in January to conduct a strategic review of its business, which it said at the time could lead to a sale or merger of the company.

Elan was under pressure at the time from investors critical of Chief Executive Kelly Martin's leadership and the state of the biotech company, which was burning through cash at a rapid rate. In its most recent quarterly earnings report it posted a net loss of almost $103 million.

Biotechnology company Biogen Idec Inc (BIIB.O) and Elan jointly market the multiple sclerosis drug Tysabri. Drugmaker Wyeth (WYE.N), being acquired by Pfizer (PFE.N), and Elan are jointly developing the experimental Alzheimer's drug bapineuzumab. These are currently Elan's two most important products.

(Reporting by Ben Klayman in Chicago and Ransdell Pierson and Lewis Krauskopf in New York, editing by Jackie Frank)

Elan in talks to sell minority stake: report

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Zimbabwe Consumer Prices Settle Another 1.1% in April After 3% March Drop

Zimbabwean consumer prices eased 1.1% in April after falling 3% in March, with firm food and non-alcoholic beverage prices slowing the decline, the Central Statistical Office said Friday.

Prices have been declining – inflation has been negative – since the country adopted a mix of hard currencies early this year and abandoned the hyperinflated Zimbabwe dollar.

Price declines are a relatively new experience for Zimbabweans who saw their cost of living rise in percentage increments measured in the billions, trillions and quadrillions as money printing by the central bank drove the Zimbabwe dollar to nearly complete worthlessness.

Ultimately consumers and businesses stopped using the debased currency and adopted the U.S. dollar and South African rand as the main units of exchange, leading the government to authorize the use multiple hard currencies and set aside the national currency.

The Zimbabwean dollar still changes hands among street vendors, however, who hand their customers Z$50 billion notes to make small change from hard currency notes.

Economist Prosper Chitambara of the Labor and Economic Development Research Institute of Zimbabwe told reporter Patience Rusere of VOA's Studio 7 for Zimbabwe that the lesser decline in April compared with March indicates that prices overall are stabilizing.

Economist Eric Bloch told reporter Blessing Zulu that the Zimbabwean economy is showing signs of recovering.

More reports from VOA's Studio 7 for Zimbabwe...

 

Zimbabwe Consumer Prices Settle Another 1.1% in April After 3% March Drop

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UAW ratifies new GM labor agreement

DETROIT (Reuters) – The United Auto Workers union has overwhelmingly ratified a new cost-cutting labor agreement with General Motors Corp (GM.N), clearing a major hurdle in the automaker's restructuring efforts.

UAW President Ron Gettelfinger said at a news conference on Friday that 74 percent of the UAW-represented workers have ratified the agreement, under which the union would receive a 17.5 percent stake in a restructured company in return for retiree healthcare concessions.

The amended agreement covers about 54,000 U.S. hourly workers in 46 plants and warehouses.

The ratification comes as GM races to slash debt and labor costs ahead of a government-imposed deadline of June 1. The No. 1 U.S. automaker is widely expected to follow smaller rival Chrysler LLC into bankruptcy protection with the financial backing of the U.S. Treasury.

"GM is going to have a clean balance sheet when this is over," Gettelfinger said at the conference. He added the new contract represents "a dramatic reduction in benefits and a lot of risk for the future" for retirees.

Under the agreement, GM would pay half of its $20 billion debt owed to a union-aligned healthcare trust in stock, instead of cash.

The deal would give the healthcare trust, or Voluntary Employees Beneficiary Association, a 17.5 percent stake in a restructured company and warrants for an additional 2.5 percent stake.

The U.S. government would get a 72.5 percent stake under the restructuring, while GM's bondholders would receive 10 percent and warrants for an additional 15 percent stake.

(Reporting by David Bailey and Nick Carey, Writing by Soyoung Kim, editing by Gerald E. McCormick)

UAW ratifies new GM labor agreement

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R.H. Donnelley files for Chapter 11 protection

BANGALORE (Reuters) – U.S. yellow-pages publisher R.H. Donnelley Corp (RHDC.PK) filed for Chapter 11 bankruptcy protection on Thursday, court documents showed.

In a filing with the U.S. Bankruptcy Court for the District of Delaware, the company listed total assets of about $11.88 billion and total debts of about $12.37 billion.

R.H. Donnelley's largest unsecured creditors include Bank of New York Mellon (BK.N) and U.S. Bancorp (USB.N).

The company said last week that it was seeking support of its bank lenders as part of a potential comprehensive debt restructuring plan, after it missed a $55 million interest payment on a series of senior unsecured notes due on April 15.

R.H. Donnelley exercised a 30-day grace period for the payment and then asked creditors for a forbearance until May 28.

Competitor Idearc Inc filed for bankruptcy protection in March and said it had agreed with its lenders to reduce its total debt from around $9 billion to $3 billion in secured bank loans.

The case is In re: R.H. Donnelley Corp., U.S. Bankruptcy Court, District of Delaware, No. 09--11833.

(Editing by Muralikumar Anantharaman)

R.H. Donnelley files for Chapter 11 protection

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Wall Street set to open higher after key data

NEW YORK (Reuters) – Stock index futures pointed to a higher open on Wall Street on Thursday after key government data indicated the recession may be abating while investors eyed a looming bankruptcy for General Motors.

The market looked set to recover some ground lost after Wednesday's sharp drop as rising yields on U.S. government debt fueled concern that businesses and consumers would face higher borrowing costs, hampering an economic recovery.

Government data showed new orders for long-lasting U.S. goods rose more than expected in April, while the number of workers filing new claims for jobless pay dropped by 13,000 last week.

"The claims held below recent levels, this is further evidence that the decline in the labor market seems to be leveling off," said Dan Greenhaus, an analyst at Miller Tabak & Co in New York.

"Both numbers will matter for the market today, seeing as how we're past earnings season. Macroeconomic data will certainly be focused on right now."

General Motors Corp (GM.N) fell 6.1 percent to $1.08 in premarket trade as the automaker moved closer to filing the largest bankruptcy ever for a U.S. industrial company after a crucial bond exchange proposal failed, while the fate of GM's European brand Opel remained uncertain after marathon talks with German officials ended without a deal.

"The impact of GM's bankruptcy, is going to be critical," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "This is a big unknown that really could have a major impact on the economy that I'm not sure the economy is really discounting properly at this point in time."

S&P 500 futures rose 3.50 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones Industrial Average futures added 27 points, and Nasdaq 100 futures rose 0.25 points.

Dow component Procter & Gamble Co (PG.N) shares rose 0.8 percent to $52.20 in premarket trade after the household products maker gave guidance for 2009 and 2010.

Auto parts maker Visteon (VSTN.PK) and Metaldyne Corp filed for Chapter 11 bankruptcy protection for their U.S. operations, becoming the latest casualties of the auto industry crisis.

U.S. front month crude prices held above $63 after OPEC ministers meeting in Vienna decided to leave the group's oil output untouched at 24.85 million barrels a day.

Costco Wholesale Corp (COST.O) slid 2.9 percent to $47.41 in premarket trade after the retailer reported third-quarter profit fell 29 percent, as shoppers stuck to buying basic such as food and medicine and curbed discretionary purchases of clothes and jewelry.

Also on the earnings front, H.J. Heinz (HNZ.N) fell 1.3 percent to $35.80 in premarket trade after the ketchup maker reported a lower quarterly profit on Thursday as sales to restaurants fell in the recession.

Citigroup Inc (C.N) shares rose 1.1 percent to $3.74 after the Wall Street Journal said the bank is in early negotiations with the U.S. Securities and Exchange Commission to settle a probe into whether it misled investors by not properly disclosing the amount of troubled mortgage assets it held as the markets started to fall in 2007, citing people familiar with the matter.

On Wednesday, the Dow Jones industrial average (.DJI) fell 173.47 points, or 2.05 percent, to end at 8,300.02. The Standard & Poor's 500 Index (.SPX) was down 17.27 points, or 1.90 percent, at 893.06. The Nasdaq Composite Index (.IXIC) was down 19.35 points, or 1.11 percent, at 1,731.08.

Since reaching a low in early March, the Dow has gained nearly 27 percent and the S&P 500 has risen more than 32 percent.

(Additional reporting by Ryan Vlastelica)

(Reporting by Chuck Mikolajczak; Editing by Theodore d'Afflisio)

Wall Street set to open higher after key data

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Hedge fund firm Pequot to shut down amid probe

NEW YORK (Reuters) – Prominent hedge fund firm Pequot Capital told investors on Wednesday it will shut down amid an ongoing government probe into possible insider trading.

"Public disclosures about the continuing investigation have cast a cloud over the firm and have become a source of personal distraction," Arthur Samberg, the firm's founder and one of the industry's elders, wrote in a letter.

Reuters obtained a copy of the letter sent to clients on Wednesday.

Pequot, which most recently managed $3 billion, became the target of a Securities and Exchange Commission and U.S. Attorney's office investigation several years ago. While regulators and prosecutors brought no charges and closed the probe in 2006, the government reopened the case in 2008.

Samberg said the firm will spin off its Matawin portfolio and its Special Opportunities fund and liquidate its Core Funds.

(Reporting by Dan Wilchins and Svea Herbst-Bayliss; Editing by Andre Grenon)

Hedge fund firm Pequot to shut down amid probe

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Home Prices Continued Their Decline in March

Home sales may be up in many parts of the country but prices continue to scrape along the floor, raising fresh doubts about the recovery of a critical sector.

Prices in 20 major metropolitan areas dropped by 18.7 percent in March when compared with the same month a year ago, according to the Standard & Poor’s Case-Shiller Home Price Index that was released Tuesday. That was about the same as February and just shy of January’s record plunge of 19 percent.

“Foreclosures have picked up, and that seems to be pushing prices down,” said David M. Blitzer, chairman of S.& P.’s index committee. “The recession is really biting.”

Seventeen of the cities tracked by the index declined from February. That was an improvement over the previous month, when prices in all 20 areas fell. Denver and Charlotte, N.C., managed tiny gains, while Dallas was flat.

In many urban areas, including those tracked by Case-Shiller, the residential real estate market is essentially cleaved in two. The top half of the market is largely stagnant, with owners unwilling to sell and buyers unable to buy. “Move-up” families seeking another bedroom or a better kitchen are an endangered species.

The low end, however, is sizzling, as investors armed with cash and first-time buyers equipped with tax breaks compete for foreclosed properties.

As a result, some argue, the Case-Shiller numbers make the market appear worse than it is. Minneapolis is a case in point. Prices there plunged 6.1 percent from February to March — the largest single-month drop for a city in the history of the index.

The area was not prone to the bubble excesses of California or Florida, but it has its share of foreclosures. Until recently, banks tried to hold on to these houses to get the best price, said Steve Havig, president of the Minneapolis Area Association of Realtors.

Overwhelmed, the banks are now taking a different approach: dumping the properties to clear their books, making them “extremely motivated sellers,” as Mr. Havig calls them.

These bargain homes make up nearly half the sales in Minneapolis, and are a big reason the agents’ own numbers show a one-year median price decline of 22.9 percent. That closely matches the corresponding Case-Shiller drop of 23.3 percent. But when foreclosures and short sales are stripped out, the decline for so-called traditional homes is much smaller: 2.3 percent.

“Clearly, there are two different markets operating here,” Mr. Havig said. That can lead to frustration among buyers of traditional houses, who expect better deals.

Another national flood of foreclosures, which many are predicting for this summer, would continue to push down the indexes. But even if that does not happen, many analysts predict more pain for homeowners who want to sell or refinance. Buyers who do not get a foreclosure, meanwhile, might feel they can afford to wait.

“It is highly unlikely that the overall price adjustment seen to date is sufficient to balance supply (which is enormous) with demand,” Joshua Shapiro, chief United States economist for MFR, wrote Tuesday in a note to clients. He estimated the index was only two-thirds of the way to its ultimate bottom.

Some experts had predicted slightly better March numbers, by which they meant that the relentless rate of decline would noticeably slow. They were disappointed.

“Were this pace to continue, the loss of housing wealth this year would be roughly equal to the entire G.D.P. of China,” Ian Shepherdson of High Frequency Economics wrote in a research note. With household wealth evaporating, he added, “consumption will be very weak for the foreseeable future.”

New York and Detroit, which both showed large monthly declines in March, show the different legacies of the boom. Prices in New York are still up 73.4 percent from January 2000, while those in Detroit are 29 percent lower. A Detroit house costs about the same today as it did 14 years ago.

Las Vegas joined Phoenix in showing a decline from the area’s peak of more than 50 percent. Dallas, which never had much of a housing boom, is the best-performing city in the index, down 11.1 percent from its peak.

The national Case-Shiller index for the first quarter, also released Tuesday, showed a 19.1 percent decline compared with the first quarter of 2008, the biggest drop in the index’s 21-year history.

Home Prices Continued Their Decline in March

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Markets Rise on Consumer Optimism

Consumers in the United States are feeling more optimistic, and on Tuesday, so were investors.

After several days of declines on concerns about the country’s debt issuance and the strength of the dollar, stock markets rebounded Tuesday on a surprising bounce in consumer confidence. The private Conference Board reported that consumer sentiment rose again in May, hitting its highest levels in eight months.

As traders returned to Wall Street after the holiday weekend, the glints of good news in those numbers were enough to outweigh other figures showing that housing prices continue to tumble as fast as ever. Every sector of the Standard & Poor’s 500-stock index was higher, led by consumer-geared companies like McDonald’s, the Home Depot and Lowe’s home-improvement chains, and the Walt Disney Company.

At noon, the Dow Jones industrial average was up nearly 170 points or 2.1 percent while the S.&P. 500 was 2.1 percent higher. The technology-focused Nasdaq outpaced other indexes, rising almost 3 percent, on gains among computer makers, search engines and Internet firms.

Investors also edged back toward the dollar, a week after they pushed the greenback to its lowest point in five months on concerns about inflation and the expanding supplies of new currency and big federal deficits. The dollar index, which measures the dollar’s performance against six major currencies, was up 0.2 percent.

As the dollar gained ground, gold prices fell moderately, but crude oil futures hovered slightly higher.

To some economists, the new figures on consumer sentiment marked another signal that the force of the recession was beginning to abate.

Consumers, whose spending accounts for more than two-thirds of the economy, have been shedding their pessimism like heavy winter coats in the last few months as stocks bounded higher and credit markets stabilized. Consumer spending rose unexpectedly in the first quarter, at an annual rate of 2.2 percent, and some retailers have said their sales were no longer falling as sharply.

The Conference Board’s index of consumer confidence rose to 54.9 in May from 40.8 last month. Consumers said their current situation was just slightly better than a month ago, but their expectations shot up, to 72.3 from 51 in April.

Although consumers are still downbeat by historical standards, they are feeling more upbeat about the future than just a few months ago, when the stock market was sliding toward 12-year lows and the banking system was teetering. Consumers now expect the job market, business conditions and their incomes will improve in the months ahead.

The more buoyant mood among consumers echoed recent surveys of home builders, manufacturers and service-sector businesses, which have reflected a retreat from historic levels of pessimism.

“Anything that measures sentiment has improved,” an economist at Deutsche Bank, Joseph LaVorgna, said. “We’re not seeing it in the hard data, but seeing it in the sentiment. But you can’t spend confidence.”

Markets Rise on Consumer Optimism

Hot News: Wall Street rises on consumer confidence reading

Russian Uranium Sale to U.S. Is Planned

MOSCOW — Russia, already a large supplier of nuclear-reactor fuel to Europe and Asia, is expected on Tuesday to sign its first purely commercial contract to supply low-enriched uranium to United States utilities.

With the signing, Russia’s nuclear-fuel trade with the United States will shift to a commercial footing, similar to Russia’s dealings with other consumers of fuel, like France and the Netherlands, both longtime buyers of Russian uranium.

For the United States, the change is a sign that Washington is acquiescing to the idea of a major Russian role not only in the international nuclear power market, but also in the domestic market. Russia’s outsize role in supplying uranium to American utilities had previously been justified because the fuel was a byproduct of a program to eliminate nuclear weapons. Now the Russians will be selling nuclear fuel from virgin uranium.

Yet the contract signing, after North Korea’s nuclear test on Monday, also underscores a counterintuitive element of American nonproliferation policies.

The policy of buying diluted, or blended-down, Russian weapons-grade uranium yielded a clear nonproliferation benefit. The new mode — of having the Russians enrich new uranium for United States markets — is not directly beneficial for nuclear security because it does not remove weapons-grade uranium from stockpiles.

Yet by encouraging the commercial availability of Russian enrichment services, the United States deprives other countries of the rationale to have enrichment programs of their own.

The United States continues to want to see Russian weapons material blended down where possible, and is encouraging a largely open market to allow Russian enrichment facilities built for military purposes to become part of the international market for enrichment.

As a legacy of the cold war, Russia possesses about 40 percent of the world’s uranium enrichment capacity, much more than it needs to service its domestic reactors, and it has sought direct access to the American utilities market for years.

“We are finally working in the principle of mutual profit,” Sergei G. Novikov, a spokesman for the Russian state nuclear energy company, Rosatom, said in an interview about the expected first contract signing.

Techsnabexport, the Russian state company that exports low-enriched uranium, is expected to sign the contract in Moscow with a consortium of American nuclear companies. Techsnabexport declined to identify its American partners or the size of the contract on Monday.

The new contract is separate from a program to dilute surplus weapons uranium into civilian fuel for use in American reactors. Under that so-called megatons to megawatts program, begun in 1993, Russia is already the largest supplier of enriched uranium to American utilities and provides about half of all uranium consumed in civilian reactors in the United States.

Yet Russia has been prohibited from selling directly to the utilities by provisions of American law to prevent dumping at below-market prices, and it was compelled to deal only through a monopoly importer, the United States Enrichment Corporation.

That company was originally part of the United States Department of Energy, and the megaton-to-megawatts deal was a government-to-government agreement. When the United States sold off the enrichment corporation to a private company, the new entity was given a continuing monopoly on the sale of blended-down warhead materials from Russia. The company, USEC, said it paid competitive prices for the material. The Russians, meanwhile, complained that they were being underpaid.

In a negotiated settlement in February 2008, the United States agreed to allow Russia to sell low-enriched uranium directly to domestic utilities without the involvement of the enrichment corporation. But all sales of diluted weapons uranium will still go through the corporation. A spokeswoman for the company said the initial direct Russian sales will be small and will not harm its business.

Nuclear reactors run on uranium that is composed of 3 to 5 percent uranium 235. In nature, uranium is only 0.7 percent uranium 235.

Uranium used in weapons and in the reactors that power nuclear submarines use more than 90 percent uranium 235. “Enrichment” means raising the proportion of 235 compared with the dominant type, 238, and the Russian industry was set up to provide large volumes of high-enriched uranium for weapons and marine reactors.

Russia is a major supplier to the developing world by tapping this cold war-era military industrial base. It has provided 80 tons of low-enriched uranium manufactured into fuel assemblies to Iran for use in that country’s Bushehr reactor, for a price of $46 million, according to Atomstroyexport, the Russian contractor building the reactor.

Andrew E. Kramer reported from Moscow, and Matthew L. Wald from Washington.

Russian Uranium Sale to U.S. Is Planned

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First Quarter Was New Low for Worlds Developed Economies

PARIS — The economies of the developed world turned in their worst quarterly showing ever in the first three months of 2009, the Organization for Economic Cooperation and Development said Monday.

The combined gross domestic products of the 30 countries in the organization fell by 2.1 percent in the January-March period from the previous quarter. If that preliminary estimate holds, it would be the largest drop since 1960, when records were first kept. The G.D.P. of member countries fell 2 percent in the last quarter of 2008.

Of the seven largest O.E.C.D. economies (the United States, Japan, Germany, Britain, France, Italy and Canada), only in France -- where the economy shrank 1.2 percent -- did the rate of contraction ease in the first quarter, the group estimated. Official Canadian data are not yet available.

Compared with the first three months of 2008, the O.E.C.D. economies — which accounted for 71 percent of world G.D.P. in 2007, according to the World Bank — shrank 4.2 in the first quarter. The United States contributed 0.9 percentage point of that decline, while Japan contributed 1 point, the 13 largest euro area countries 1.3 points, and the remaining member countries 1 point.

Despite the dismal data, there have been signs that the rates of decline in major economies are slowing.

The Ifo research institute at the University of Munich said Monday that its German business climate index rose to 84.2 from 83.7 in April, the second month of improvement. While that was below the consensus reading of 85 that economists polled by Bloomberg and Reuters had expected, Hans-Werner Sinn, president of Ifo, said in a statement that the data pointed “to a gradual stabilization of economic output at a low level.”

First Quarter Was New Low for World's Developed Economies

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Special Report: Business of Green: Britain’s Ideal: Green Homes

LONDON — Aiming to drastically cut its emissions of planet-warming pollutants, Britain is telling its home builders to design a new generation of super-efficient houses that use only clean power and add no net carbon to the atmosphere.

Its rules will mandate that all new homes be zero-carbon by 2016, one of the toughest requirements in the world. While officials and the industry are still working out what exactly that will mean, it is certain to bring big and potentially costly changes to a sector now suffering through a painful slowdown.

Architects, construction companies and manufacturers will have to approach development in a fundamentally new way, thinking from the earliest stages of planning about things like energy efficiency, solar panels and communitywide heat-sharing systems.

The government and environmentalists say this is necessary if the country is to meet the goal, now enshrined in law in the Climate Change Act, of an 80 percent cut in carbon dioxide emissions by 2050.

Home energy use, which accounts for 27 percent of Britain’s carbon output, must be steeply reduced, officials say.

John W. Alker, a spokesman for the UK Green Building Council, which promotes sustainable construction in Britain, said the government had recognized that this would mean more than just incremental change. “It’s not about saying how do we do what we do now but a little bit better, but saying how do we do the ultimate?” he said.

Although many countries are seeking to reduce emissions from offices and other commercial properties, Britain’s move puts it at the forefront of action on carbon from homes, along with Germany and Scandinavia, where super-efficient “passive houses” are gaining popularity.

Officials here say they are also working on a plan to require new commercial buildings to be zero-carbon by 2019, but have yet to complete those rules.

Commercial structures account for 18 percent of Britain’s carbon emissions, Mr. Alker said. Combined with housing’s share, the energy used in buildings is responsible for 45 percent of the country’s global-warming gases.

The zero-carbon homes effort coincides with plans to encourage the construction of three million houses by 2020 to ease a national shortage. That work is now stalled by the recession, which has sent housing starts plummeting, but homes that have not yet been built are still expected to account for 20 percent of all residences in 2050, according to the Zero Carbon Hub, a public-private body set up to drive implementation of the new standard.

The decision to eliminate newly built homes’ carbon emissions sends an important signal about how seriously Britain takes the environmental challenge, said Simon J. McWhirter, of the conservation group WWF. Still, it is only a first step, advocates warn. Even in a good year, newly built houses are only about 1 percent to 2 percent of the housing stock.

The Department of Energy and Climate Change says it wants existing buildings to be close to zero-carbon by 2050, and has proposed a list of voluntary measures like home energy makeovers. But there are no plans for a compulsory program similar to the one for new homes, disappointing environmentalists and angering some in the construction industry.

The industry worked closely with green groups and government to design the zero-carbon requirement, which was announced in 2006 and will be reached after stepping-stone increases come into force in 2010 and 2013.

It applies only to England, although regional governments in Wales and Scotland are taking similar measures.

John H. Slaughter, policy director of the Home Builders Federation, the main industry body, said builders recognize the importance of carbon reductions and are prepared to meet the new standards: but without a requirement to retrofit existing homes, the 2016 mandate could put new home developers at an unfair disadvantage, he said.

A zero-carbon home could cost £20,000, or $32,000, more to build than a traditional one — a price buyers may not be willing to pay.

“Consumers do have a choice,” Mr. Slaughter said. “They don’t have to buy a new home, they can buy an existing home.”

Others say zero-carbon won’t be that expensive. Ewan Willars, head of policy for the Royal Institute of British Architects, said much of the technology used for at-home renewable power generation is manufactured only on a small scale, and will get much more economical as suppliers begin to produce for a mass market.

Sue E. Riddlestone, executive director of BioRegional, an environmental group that built BedZED, a 100-unit zero energy housing complex in south London, in 2002, said that neighborhood-based energy generation would not have to be developers’ responsibility, but could be spun off to power companies that would turn a profit after investing in equipment. Others have proposed novel financing mechanisms or long-term loans to spread the cost over time, when it could be balanced by savings on energy bills.

“The front-end cost is probably the single biggest barrier” to achieving a breakthrough in building standards, Mr. Slaughter said. “That’s part of the conversation we’re having with government.”

Also worrying home builders and the companies that supply them is a lack of agreement on the definition of zero-carbon. After early ideas proved unworkable, officials are reconsidering their initial plans, and say they will announce new parameters by late July.

A zero-carbon home is one in which energy use has been reduced as much as possible and which gets the power it does need only from clean sources. If it takes some energy from the national grid, it must replace it by feeding power in over the course of the same year.

It is the details that have proven tricky. Government’s initial hope, that every zero-carbon home or development would generate all its renewable power on-site, would be impossible for about 80 percent of projects, said Neil Jefferson, chief executive of the Zero Carbon Hub.

Mr. Jefferson said the new definition is likely to set out priorities, requiring builders first to ensure that a new home is as energy-efficient as possible, meeting a power-saving target still to be announced. Then, they will have to install as much home- or development-based energy generation as possible, tapping sources like solar water heating and wind power.

Finally, they will probably be allowed to provide some energy from off-site renewable sources, maybe even paying to erect a new turbine at a wind farm hundreds of miles away. Environmentalists and builders are waiting to see which options the government deems acceptable.

What is possible varies widely from site to site. An apartment building in central London, for example, has far less space for wind turbines and solar panels than a rural farmhouse, but may be more easily able to pipe heat from a nearby biomass boiler to many homes.

Architects and builders say they will have to think about sustainability from the start. Maximizing roof space and orienting buildings toward the south or southwest, for example, mean that even if photovoltaic cells are not installed immediately, a home will be able to accommodate them as they grow less costly and more sophisticated in the future, said Mr. Willars, of the architects’ institute.

For most homes, a solar panel on the roof can provide about 60 percent of all hot water needed, Mr. Jefferson said. Energy-efficient boilers and appliances cut power use. District heating, where heat created from renewable sources like biomass or as an otherwise-wasted byproduct of electricity generation is distributed to numerous residences, uses less energy than traditional heating. And top-quality building materials and modern construction methods can drastically reduce the energy lost from a home, said Alan Shingler, a partner at the London architecture firm Sheppard Robson, which designed the Lighthouse, a zero-carbon home in Watford, outside London.

Solutions linking the power needs of whole neighborhoods work better than looking at one home in isolation, Mr. Willars said. “The days when we were striving to achieve an airtight box bristling with wind turbines are disappearing,” he said. “Now we’re trying to get to zero carbon in the most efficient, most effective manner.”

While a handful of model zero-carbon developments already exist, building such homes on a wide scale is a completely new challenge for the industry.

Mr. Slaughter, of the Homebuilders Federation, said construction workers would likely need training in new construction methods. Suppliers of everything from solar panels to insulation and draft-excluding windows would have to step up production for the 2016 target to be achievable, he added.

While building standards have risen sharply in recent years, delivering hundreds of thousands of zero-carbon homes a year would be tough, said Simon Storer, spokesman for the Construction Products Association, a trade group based in London.

“To do it for all housing by 2016 is a very big ask,” he said.

Special Report: Business of Green: Britain’s Ideal: Green Homes

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Latvia Races to Cut Deficit to Keep to Its Bailout Deal

RIGA, Latvia — Many countries in the world have felt the sting of the economic crisis, but few can match Latvia for sheer pain. A harrowing contraction in the economy is reordering expectations for the future as the country’s leaders grapple with a credit-fueled boom turned to bust.

Two brothers, Matiss and Oskars Barkoviskis, see it every day as they make their rounds here in their borrowed Mazda pickup truck. In the three months since they founded a charity for feeding the poor, they have discovered a strong and growing demand for their services.

In just that time, the number of families they visit each week has nearly doubled, with new ones answering ads in Riga’s free newspaper every day. They started by delivering groceries down the dirt roads outside Riga and into decrepit, Soviet-era high-rise apartment buildings. But now they find themselves helping out families who live in apparently comfortable surroundings, but who can no longer afford to feed themselves.

“Before we started this project, I never thought people could live like this,” said Matiss Barkoviskis, 20. “There is a sadness that I did not expect.”

It is not hard to grasp what stands behind the sour mood in Latvia. Forced into the arms of the International Monetary Fund, the Latvian government is now slashing its budget and the wages of state employees in a bid to rebalance a society that had run badly out of whack.

Austerity is rippling down the social hierarchy, as the affluent cancel vacations, middle-class people fret about social descent, and Dickensian scenes of destitution multiply.

In Riga, the capital, abandoned construction sites, vast lots of repossessed cars and a new, utterly empty shopping mall testify to the misery. But the government’s tough medicine for the crisis, stiffer than Black Balsam, the syrupy herbal liqueur that is the country’s national drink, has defined the times.

Latvia is racing to halve an enormous government budget deficit, now estimated at 12 percent of gross domestic product, even as its economy is expected to contract by 16.5 percent this year. That is a condition of the $10 billion bailout by the I.M.F. that the European Union, of which Latvia is a member, also supported.

Prime Minister Valdis Dombrovskis, acutely aware that the previous government fell after Riga was shaken by riots in January, must now convince wary lawmakers that the country’s choices have narrowed to bad and worse.

“There is a growing awareness of what the problems are, but also what the alternatives are,” Mr. Dombrovskis said in an interview. “The alternative is not receiving international financing.”

The alternative, in other words, is default.

In better times, the global financial system would barely flinch at the idea of Latvian insolvency. But the other Baltic countries, Estonia and Lithuania, as well as Romania and Bulgaria and even Western stalwarts like Ireland all gorged on cheap credit and are all groaning under a heavy debt load. The last thing they want to see is a default, which could reignite a crisis that appears to be easing.

“Latvia is a reminder that there are other countries struggling with huge imbalances, though nobody has turned out as bad as Latvia,” said Lars Christensen, chief analyst at Danske Bank in Copenhagen, who has long warned of a convulsion in the region. “Some come pretty close.”

In the heady days after it gained membership in the European Union in 2004, Latvia pegged its currency, the lat, to the euro in anticipation of eventually adopting the European currency. Its economy blossomed and Riga, blessed with its abundance of stunning Art Nouveau architecture, emerged as a kind of capital of the Baltics.

Euro-denominated lending exploded, to the point where 85 percent of household debt was held in euros. But that seemed immaterial at the time, since the euro would soon replace the lat as the country’s currency, or so it was thought.

The lat is still with Latvia, however, and so is a colossal problem of how to devalue the currency — the usual adjustment mechanism in a financial crisis — without creating a crushing debt burden. Rather than let the currency decline, the government has chosen what it calls an “internal devaluation,” in which wages are forced downward to restore the economy’s equilibrium.

In December, the previous government reduced wages by at least 15 percent for most civil servants, and Mr. Dombrovskis is promising more. The government’s procurement budget was cut by a quarter, while the value-added tax increased to 21 percent from 18 percent. Exceptions for books and hotels fell away; excise duties on alcohol and gasoline rose.

The experience is weakening the bonds that Latvians feel for their state. Though proud of their heritage in language and culture, many now speak openly of emigration, and fading memories of citizens standing together with leaders to throw off Soviet domination 19 years ago only accentuate the alienation.

“Independence or bondage is an easy question to answer,” said Krisjanis Karins, a former Latvian economy minister. “This time it is not so cut and dried.”

Girts, a lanky 40-year-old doctor’s assistant, works three jobs in three hospitals for a monthly salary of $1,350 and spends half his income servicing a euro-denominated mortgage on his apartment.

The mood at Latvia’s state-run hospitals, he said, is now one of foreboding, as employees gripe that managers did not share in the pain of a 20 percent wage cut in January — one that covered all government workers — and will dodge another later this year. “I have very little faith left in the Latvian state,” said Girts, who asked that his surname be withheld for fear of retribution by supervisors. “I don’t know how much longer this can go on.”

For Latvia’s poor, the mood falls somewhere between bewilderment and frustration, as families struggle to comprehend why their world has come apart.

It did not make them rich, but Latvia’s boom over the past few years reached Aija Voitov and her husband, Juris, who live in a two-room shack heated by a crude metal stove down a dirt road outside Riga.

Though Mr. Voitov switched jobs from time to time, work was plentiful, and Mrs. Voitov had only to walk over to the nearby main road to find work at a big supermarket. Three months ago, Mr. Voitov lost his job at a food processing factory where he had earned $735 a month, a tiny enough sum. Since then, as the family scrapes by on state assistance, Mrs. Voitov confesses little comprehension of exactly what went wrong, only that in the past, things were better.

“It was normal, it was good,” Mrs. Voitov said. “There was plenty of work.”

Latvia Races to Cut Deficit to Keep to Its Bailout Deal

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Head of Brokerage Unit Leaving Morgan Stanley

Morgan Stanley has dismissed its head of prime brokerage, Stu Hendel, who ran the bank’s hedge fund service business since the fall of 2006, people who were briefed on the decision said Thursday.

Mr. Hendel’s departure was announced in an internal memorandum.

The bank has hired Alexander Ehrlich, the head of prime brokerage at UBS, to take over the post, according to the memo.

Mr. Hendel declined to comment Thursday as did a spokeswoman for Morgan Stanley. The internal memorandum said Mr. Hendel was leaving “to pursue outside interests.”

The change coincides with the bank’s shift in its relationship with hedge funds, which were once a major profit center. Morgan Stanley now says that it plans to serve a smaller number of hedge funds, and several members of its prime brokerage division have left, including the unit’s chief financial officer.

Morgan Stanley ran into problems last fall in part because hedge funds that kept assets at the bank pulled their money out. The bank also alienated some hedge funds when its chief executive, John J. Mack, publicly blamed short-sellers — investors who bet against stocks — for the decline in Morgan Stanley’s share price. Many of the hedge funds that used Morgan Stanley for their trading used short-selling in their strategies.

Soon after Mr. Mack’s comments, the government imposed a temporary ban on short-selling. Many hedge funds blamed the ban in part for record losses last year. Mr. Mack said in later interviews that he was not against short selling.

Morgan Stanley had ramped up its prime brokerage business in recent years as the hedge fund industry exploded, and the unit had been highly profitable.

The bank had also expanded its operations to serve hedge funds that traded in areas other than stocks, and those assets tended to be less liquid. Part of the leverage that investment banks used before the financial crisis was for lending to hedge funds through prime brokerage units. But as firms like Morgan Stanley began working with more hedge funds that traded in less liquid areas, they were essentially borrowing short-term money to fund illiquid trades.

Mr. Hendel had worked at Morgan Stanley for most of his career, though he left in 2004 for two years to work at Eton Park, a hedge fund in New York.

Head of Brokerage Unit Leaving Morgan Stanley

Hot News: A.I.G. Chief, Brought in During Bailout, to Leave

G.M. Reaches Deal With Canadian Workers

TORONTO (AP) — The president of the Canadian Auto Workers said Friday that the union and General Motors Canada had agreed on a cost-cutting deal.

The announcement came from Ken Lewenza, the head of the union. An agreement on wages and other costs is critical for General Motors Canada to receive government aid.

The deal comes a day after the United Auto Workers reached a tentative deal with the United States government and the General Motors Corporation. G.M. is also talking with its bondholders.

GM is facing a June 1 government-imposed deadline to restructure or be forced into bankruptcy protection.

G.M. Reaches Deal With Canadian Workers

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A.I.G. Chief, Brought In During Bailout, to Leave

Edward M. Liddy, the retired insurance executive drafted by the government to lead the American International Group after it nearly collapsed last fall, is stepping down after eight grueling months with virtually no pay.

Mr. Liddy took on the job of chairman and chief executive of the insurer as a form of public service, but he ended up being castigated by members of Congress who seemed unable to separate him from the financial turmoil he was brought in to calm. Even he said on Thursday that the job was too big and complex as currently designed, and that the company and its government backers would not find anyone else who could take it on for a salary of $1 a year, as he had. “This is going to be much more of a classic succession process,” Mr. Liddy said. He recalled that before he “parachuted in” last September on a day’s notice, A.I.G.’s previous three chief executives had all been forced out, each leaving a wider array of accounting and financial problems in his wake.

He said he had begun discussing his own departure with A.I.G.’s board a number of months ago, and had agreed to stay until the company arrived at what he called “a logical inflection point,” with stable liquidity and no potential threat to the global financial system. A.I.G. was now at that point, he said, acknowledging that it still had several years’ worth of problems ahead. He said he would continue at the helm until a search firm found a successor.

“This isn’t exactly what I thought I’d be doing in retirement,” he said Thursday in an interview.

Separately, lawyers representing A.I.G.’s insurance policyholders sued A.I.G. on Thursday in California Superior Court. The suit also named its executives, including Mr. Liddy, and its outside auditor, PricewaterhouseCoopers. The lawsuit accused A.I.G. of improperly diverting money from its insurance units, exposing policyholders to the risk that their claims might never be paid.

Linda M. Harris, a financial planner and one of the plaintiffs, said she had put her clients into millions of dollars’ worth of life insurance policies and other contracts that she feared A.I.G. might not honor. She said she was an A.I.G. policyholder herself.

The complaint asserted that in many cases, she and her clients could not get out of these contracts without losing some or all of their investments.

State insurance regulators are supposed to prevent holding companies from stripping necessary capital out of insurance subsidiaries. But Ms. Harris and her lawyers said in the suit that they believed A.I.G. had pledged the insurance subsidiaries’ money to pay back the Federal Reserve, as part of the most recent restructuring of A.I.G.’s federal bailout.

One provision of the latest agreement calls for A.I.G. to turn the future cash flows of its American insurance businesses into a security, which would be used to pay back roughly $9 billion of its rescue package from the Fed.

A spokeswoman for A.I.G., Christina Pretto, said the insurer had not had a chance to review the suit and could not comment. The lawsuit is just the latest in a string of painful and debilitating disputes that have pitted A.I.G. against shareholders, former executives, federal and state prosecutors, members of Congress, unions and regulators.

In March, for instance, A.I.G. was roundly criticized for paying retention bonuses to people in its financial products unit — the division that sold the notorious credit-default swaps at the heart of A.I.G.’s near collapse. Even though the bonuses were granted before his tenure, angry members of Congress grilled Mr. Liddy for paying them, which they saw as an abuse of taxpayer money. Afterward, the recipients of the bonuses complained bitterly that Mr. Liddy had not backed them up. Some resigned.

“There are a lot of cooks in the kitchen,” Mr. Liddy said Thursday, when asked if he thought his position at A.I.G. required him to deal with conflicting demands that were impossible to meet.

He said the job entailed answering to the company’s board, the Fed, the Treasury, Congress and 450 regulatory bodies in 130 countries.

“It doesn’t make sense to have one person do it,” he added.

He has recommended that A.I.G. separate the chairman and chief executive jobs into separate positions. That would let the chairman concentrate full time on the governance of A.I.G. and the companies it will be spinning off. The chairman would also be responsible for “walking the halls of Congress” and keeping government officials informed of A.I.G.’s activities, which could avert surprises and scandals. That would free the chief executive to oversee A.I.G. operations.

Mr. Liddy said that in the months immediately after the rescue it was hard to sell A.I.G.’s operating units because the economy had slowed so much. He said that now the markets seemed to be recovering and the plan could move forward more smoothly.

But even so, he predicted it would take “three-plus years” for the restructuring of A.I.G. to be completed and bailout money to be repaid.

“At 63 and one-half years of age, I don’t want to be doing this when I’m 67,” he said.

The company also said Thursday that three of its nine directors had decided not to stand for re-election at the company’s annual meeting in June. They are Stephen F. Bollenbach, a former chairman and chief executive of Hilton Hotels; Martin S. Feldstein, a Harvard economics professor; and James F. Orr III, chairman of the Rockefeller Foundation. This month, A.I.G. named six new directors, expanding its board.

A.I.G. Chief, Brought In During Bailout, to Leave

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Taiwan’s Economy Shrinks by a Record 10.2%

Filed at 6:01 a.m. ET

TAIPEI, Taiwan (AP) -- Taiwan's economy shrank by a record 10.2 percent year-on-year in the first quarter on slumping exports, the government said Thursday, as it forecast a deeper contraction this year.

Taiwan's Directorate-General of Budget, Accounting, and Statistics said the global recession continued to hurt Taiwan's exports -- the main engine of the island's economic growth.

Exports, calculated in U.S. dollars, declined by 36.7 percent year-on-year in the first quarter, it said. "This worst result is the main reason why the economy contracted significantly."

The agency said it expected the economy to shrink by 4.25 percent for all of 2009. Its previous forecast was for a 3 percent contraction.

It predicted that the economy would contract by 8.5 percent in the second quarter and 3.0 percent in the third, before returning to growth with a 5.2 percent expansion during the September-December period. It shrank 8.6 percent in the fourth quarter of 2008.

In contrast to the dire economic numbers, Taiwan's stock market is surging. It has gained more than 50 percent since its January low point, mostly on expectations of improved investment and trade opportunities with China.

Since President Ma Ying-jeou took office last May, he has moved aggressively to turn the corner on his predecessor's anti-China stance and forge closer ties with Beijing.

He has resumed high-level dialogue between the sides, facilitated regular direct transportation links, and loosened regulations on Taiwanese investment in China and Chinese investment in the island.

Taiwan and China split amid civil war in 1949. Despite their close commercial links Beijing continues to claim the island as part of its territory, and has threatened war if Taiwan seeks to make the break permanent.

Taiwan’s Economy Shrinks by a Record 10.2%

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Fed Considered Increasing Its Purchase of Debt

As it sought to keep interest rates in check and heal the credit markets, the Federal Reserve debated whether it should expand a program to buy mortgage and Treasury securities, according to minutes of an April meeting released on Wednesday.

The Fed also lowered its outlook for this year and 2010, saying that the American economy will contract more sharply and unemployment will rise higher than the central bank had originally projected in January.

Some economists called the expectations too rosy, given how quickly businesses were shedding jobs and slashing their investments.

In the April 28-29 meeting of the Fed’s Open Market Committee, some members said the purchase of additional notes “might well be warranted at some point to spur a more rapid pace of recovery.” Ultimately, though, the Fed opted for a wait-and-see approach.

“All members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases,” said the minutes, which offered a glimpse into the details of the committee’s regular closed-door meetings.

In March, the Fed announced that it would buy $300 billion in longer-term Treasuries, in an effort to keep interest rates low. Yields on the benchmark 10-year Treasury fell sharply — to 2.5 percent from 3 percent — but they have since climbed back as stocks have surged.

The Fed reaffirmed its promise to buy $1 trillion of the assets, a move intended to restore lending and encourage economic recovery.

“They didn’t really tell us anything complete,” said Jan Hatzius, chief United States economist at Goldman Sachs. “They said they’re thinking about expanding the programs, but we knew they had to be thinking about that because over the next few months they’ll have filled the quota if they continue at this pace.”

The Open Market Committee said it now expected the economy to shrink 1.3 percent to 2 percent this year, a sharper drop than its original projections of a contraction of 0.5 to 1.3 percent. And it said unemployment would reach 9.2 to 9.6 percent in 2009, up from its original estimates of 8.5 to 8.8 percent unemployment.

The national unemployment rate has already hit 8.5 percent, and close to 6 million jobs have been lost since the recession began about a year and a half ago.

Still, the Fed saw room for some tepid optimism. Members of the committee said that financial markets had “generally strengthened,” and that confidence among consumers and businesses was clawing back, though it remained low. They noticed some flickers of stability in consumer spending, housing markets and factory orders.

And they said that although businesses would probably keep cutting investments, reducing inventories and shedding jobs, a sharp decrease in inventory levels could set the stage for some expansion later this year.

Given the level of uncertainty and the challenges lying ahead for credit markets, banks and the job market, the Fed again said that interest rates would probably stay at extremely low levels for some time. The Fed slashed its target interest rate to nearly zero, and has given no sign that it is about to raise rates again.

Fed Considered Increasing Its Purchase of Debt

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Japans Economy Contracts at Record Pace

HONG KONG — Japan confirmed on Wednesday what many had long suspected: that the world’s second-largest economy contracted at a record pace during the quarter that ended March 31, as exports collapsed and companies cut back production.

Japan’s gross domestic product shrank 15.2 percent from the same period a year earlier, marking a fourth straight quarter of contraction and the biggest decline since Japan began keeping records in 1955.

It was also a deeper fall than during the previous three months, when the economy shrank a revised 14.4 percent from the year-earlier period.

With shipments of overseas goods down 26 percent from the previous quarter, export-dependent Japan has been harder hit than the United States and Europe as overseas demand evaporated amid the global economic turmoil.

Japan’s contraction from the previous quarter – 4 percent – compares to a 1.6 percent shrinkage in the United States and 2.5 percent in the euro zone.

In addition, domestic demand, which has long been feeble because of high household savings rates and years of anemic growth even prior to the financial crisis, is expected to remain poor as the worsening labor market depresses sentiment, analysts said.

Still, other recent statistics indicate that the January-March quarter may have marked a low point, possibly setting the stage to a return to growth, albeit modest and fragile.

The decline in exports is at least slowing, and Japan’s industrial output in March rose for the first time in six months and at a far faster pace than analysts had expected, data released at the end of April showed.

And on Wednesday, the car maker Mazda Motor said it would cancel an earlier plan to idle a plant for two days next month, providing anecdotal evidence of the gradual stabilization.

In addition, economists expect a plethora of government stimulus measures to bolster growth as the year progresses.

“While the economy will continue to be in a severe state, I expect less pressure from inventory adjustments and the stimulus package to provide support,” Japan’s economy and fiscal policy minister, Kaoru Yosano, said Wednesday, Bloomberg News reported.

The Japanese stock market shrugged off the G.D.P. data. The benchmark Nikkei 225 index was 0.4 percent higher by midday.

Japan's Economy Contracts at Record Pace

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Wall Street slips on housing worries

NEW YORK (Reuters) – Stocks fell at the open on Tuesday after data showed new U.S. housing starts and permits unexpectedly slid to record lows last month, tempering hopes of economic stabilization.

The data suggested demand for new construction remained relatively weak as the housing downturn persists and foreclosures mount.

The Dow Jones industrial average (.DJI) slipped 12.11 points, or 0.14 percent, to 8,491.97. The Standard & Poor's 500 Index (.SPX) was off 1.58 points, or 0.17 percent, to 908.13. The Nasdaq Composite Index (.IXIC) was down 10.53 points, or 0.61 percent, at 1,721.83.

(Reporting by Leah Schnurr; editing by Jeffrey Benkoe)

Wall Street slips on housing worries

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Madoff Trustee Seeks $3.2 Billion From Hedge Fund

The hedge fund family that topped the list of losers in the Bernard L. Madoff’s Ponzi scheme, with more than $7 billion sunk in the immense fraud, has been sued by the trustee overseeing the search for assets in the case.

The civil lawsuit, filed in federal court in Manhattan late Monday, seeks the return of $3.2 billion that the three funds took out of their Madoff accounts from 2002 until the scheme’s collapse in December, when Mr. Madoff confessed to his sons and was arrested.

The three funds were all managed and promoted by the Fairfield Greenwich Group, an investment advisory business run by Walter M. Noel Jr., Jeffrey H. Tucker and Andres Piedrahita, Mr. Noel’s son-in-law.

None of the individual partners in Fairfield Greenwich were named in the lawsuit, which was filed by Irving H. Picard of Baker Hostetler, the court-appointed trustee managing the liquidation of the Madoff brokerage firm for the benefit of his victims.

According to the lawsuit, the funds received “unrealistically high and consistent annual returns,” ranging from 10 percent to 21 percent, from the Madoff investments.

Moreover, the complaint noted, the funds’ account records showed prices for 280 stock trades that did not match the actual price range for those stocks when the trades supposedly occurred. Some trades were shown as occurring on days that were actually holidays or weekends, according to the complaint.

“These trades were clearly fictional,” the complaint said.

Under federal law, Mr. Picard can sue to recover money withdrawn from the Madoff fund up to six years before its collapse. The lawsuit reported that Fairfield Greenwich funds withdrew $1.2 billion in the final three months of the fraud.

Fairfield Greenwich did not immediately comment about the new litigation. In the past, spokesmen for the firm have denied that it had any knowledge of Mr. Madoff’s deceptions and vowed it would vigorously defend itself in court.

The trustee’s lawsuit compounds the legal difficulties facing the Noel family and other Fairfield Greenwich partners.

Massachusetts regulators have filed a civil administrative action against the firm, saying it defrauded investors by misleading them about how diligently it had checked out Mr. Madoff’s operations over the years.

Mr. Noel, Mr. Tucker and Mr. Piedrahita are also among the fund managers being sued in Connecticut Superior Court by the town of Fairfield and two of its pension plans, which lost money in several feeder-fund investments — although not through any investment with Fairfield Greenwich.

That lawsuit claims that Fairfield Greenwich and two other feeder fund managers had long been aware that Mr. Madoff was enhancing his track record through illegal activity — although they mistakenly thought he was front-running, a form of insider trading, not that he was operating a Ponzi scheme.

The firm has also been named in several private lawsuits filed on behalf of investors.

Fairfield Greenwich significantly expanded Mr. Madoff’s reach and enhanced his credibility in wealthy circles far beyond his own Wall Street world.

Mr. Noel had a gilded résumé and a family linked by marriage to wealthy investors in Europe and Latin America. His sales force, led by his sons-in-law, brought in cash from wealthy enclaves in Europe, Latin America and the Persian Gulf.

Clients of Fairfield had accounts valued at $7.3 billion when Mr. Madoff was arrested, about $60 million of which came from the firm and its partners. Internal documents show those investments had generated more than $500 million in fees since 2003 alone for Fairfield Greenwich, enriching a handful of the firm’s top executives.

The fees financed the increasingly expensive lives of the firm’s partners, most visibly for Mr. Noel, who divided his time between homes in New York, Connecticut, Florida and the island of Mustique, in the Caribbean — properties collectively valued at about $20 million.

As it raised money all over the world, Fairfield also made detailed pledges about how it would monitor and track Mr. Madoff’s investments.

The trustee’s complaint repeats the central accusation of other lawsuits: How could it have kept its promises to diligently supervise Mr. Madoff and still have missed all of the red flags in Mr. Madoff’s operation?

Madoff Trustee Seeks $3.2 Billion From Hedge Fund

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Report Weighs Fallout of Canada’s Oil Sands

In the tense debate between energy security and environmental sustainability, Canada’s vast oil sand reserves hold a special place.

Canada has the second-largest petroleum deposits after Saudi Arabia and the biggest in the Western hemisphere. Its oil sands produce 1.3 million barrels of oil a day, up from 600,000 a day in 2000. As a result, Canada has become the biggest foreign oil supplier to the United States, accounting for 19 percent of imports in 2008.

But the development of these sands in the Alberta region has also been sharply criticized by ecological groups, local communities and even Catholic bishops, for their impact on the environment, and their intensive use of both water and natural gas.

The growth in oil sands is the reason Canada has failed to contain its greenhouse gas emissions in recent years despite its commitments to do so. Critics refer to the bituminous deposits as tar sands, calling them the dirtiest fossil fuels on earth.

Trying to balance the size of Canada’s reserves and their environmental impact is a tough act. But a new report, to be released Monday by IHS CERA, an energy consulting group, sees big opportunities for the oil sands, shrouded in vast uncertainty.

“The oil sands are an immense resource in North America, and so they represent an opportunity to enhance energy security,” said James Burkhard, the managing director of IHS CERA’s global oil group. “But there are also questions about the future economic feasibility of oil sands, given the drop in oil prices, and second, there are a number of issues related to greenhouse gases, land and water use, on which there is a wide spectrum of views.”

Producing fuels from oil sands requires large amounts of natural gas and water and produces large quantities of waste material and carbon dioxide. In one process, steamed water is injected at high pressure to melt the dense, oil-bearing bitumen. In another, the sands are strip-mined and then cooked to release the oil.

Environmentalists would like President Obama to set strict limits on some of the dirtiest fuels, including heavy oil from Canada. They urge the administration to resist calls by the Canadian government to exempt oil sands from greenhouse regulations now being considered in the United States.

Canada’s oil sands industry has been hit hard by the recession and a 60 percent drop in oil prices since their peak last year. As prices tumbled, more than 70 percent of proposed heavy oil projects were postponed. But if economic growth eventually pushes up oil demand and prices rebound, the oil sand production could rise as high as 6.3 million barrels a day by 2035, according to CERA’s report. On the other hand, stringent regulation, weak economic growth or low energy prices could trim investments and result in production of as little as 2.3 million barrels a day within the next two decades, according to the report.

One of the most controversial issues related to oil sands is figuring out how much they contribute to global warming. According to CERA, which provided an analysis of 11 previous studies, producing oil sands emit 30 to 70 percent more greenhouse gases than the average oil consumed in the United States.

The CERA report points out, however, that once the total life of the fuel is considered, from the production phase to when the fuels are burned in engines — a so-called wells-to-wheels analysis — oil sands emit only 5 to 15 percent more greenhouse gases than the average fuels consumed in the country. The difference, CERA says, comes because 70 to 80 percent of total emissions come from the combustion of refined products, like gasoline and diesel, irrespective of their source.

The report recommends more research to reduce the use of natural gas in the production of oil from sands, as well as investing in technology that captures and stores carbon dioxide underground instead of emitting it into the atmosphere.

But environmental advocates point out that while Congress is looking at cutting carbon emissions in the United States 80 percent by 2050, the growing reliance on oil sands from Canada would offset some of those benefits.

“It’s not small potatoes when you stack it up against efforts to get carbon reductions,” said Matt Price, an analyst at Environmental Defence in Toronto.

Report Weighs Fallout of Canada’s Oil Sands

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Retailers, service cos. gain as people stay home

CINCINNATI – As Americans grow accustomed during the recession to spending more time at home and living in the same places longer, home-improvement companies are regaining momentum.

"My wife and I had thought of this as more of an in-between house," said Scott Nichols, 50, who had considered moving from his suburban Cincinnati home to a condo or ranch-style house. "Now we have decided to concentrate on making our current home exactly like we want it, pay it off and stay."

An insurance marketer who lives in Union Township, Ohio, Nichols hired a handyman service to knock out a wall between his kitchen and family room to make home entertaining easier.

Though construction and major remodeling remain sluggish — walloped by the housing market's plunge — demand has risen at big-box home-improvement stores for items to make small repairs and maintain lawns and gardens. Analysts say Home Depot Inc. and Lowe's Cos. Inc. are likely to show the benefits when they report their first-quarter earnings this week.

Handyman, painting and floor covering businesses also say they're booking more small jobs in recent months. Nichols' contractor said his project was part of a trend.

"We started to pick up a few weeks ago," said Dan Landon, owner of the Milford-based House Doctors franchise. "And then it was like someone flipped a switch and I'm booked solid."

Landon said his employees have been doing mostly general repairs like fixing doors, windows and decks and refreshing bathrooms and other areas. Jim Hunter, president and chief executive of House Doctor's parent company, H.D. Franchising Systems LLC in Milford, said revenue has risen this year compared with last year at more than half its franchises around the country.

"The market is still struggling with big home additions, but the soft economy is keeping us busy with homeowners just fixing things up for now," Hunter said.

In metropolitan Denver, Jacobsen Brothers Painting is seeing increased demand for maintenance painting with fewer calls for more-decorative work.

"We're not getting calls like we used to from people just tired of a color," said Mark Chase-Jacobsen, president and CEO of the Boulder, Co.-based company. "They're calling about practical concerns like siding that isn't looking too good. They're want to take care of what they have."

Floor Coverings International in Smyrna, Ga., which handles mostly residential flooring and carpeting jobs, has seen fewer big projects and more budget-conscious customers. But president and CEO Tom Wood said business swelled last month after a year of mostly flat sales.

"In April, we had the biggest increase — one month over the other — that we've seen in 15 to 16 months, and we are getting more inquiries than last year," said Wood.

Some consumers are tackling the smaller projects themselves rather than hiring professionals, repairing instead of replacing items and doing more comparison pricing, retailers and service companies said.

"Whether it's good times or bad, homeowners are going to preserve their investment," said Karen Cobb, spokeswoman for Mooresville, N.C.-based Lowe's. "When people stay at home more and are less quick to move, they are more likely to notice things like the coat of paint that needs refreshing or a dripping sink."

Stifel Nicolaus & Co. analyst David Schick wrote in a note to investors that he believes Lowe's sales were "relatively healthier" during the first quarter thanks to an increase in garden sales and smaller do-it-yourself jobs.

Citi Investment Research analyst Deborah Weinswig predicted in a note to investors that Home Depot's sales are trending better than management's guidance.

Home Depot spokeswoman Kathryn Gallagher said the Atlanta-based retailer is seeing a surge in spending on projects like fixing a leaky toilet, updating a look and just enhancing the feel and value of homes.

At the Home Depot store in the Salt Lake City suburb of Sandy, Utah, assistant manager Kristin Calderwood said shoppers are buying — just more conservatively.

"They still need to refresh kitchens if they are falling apart, but they are going down a level or two from the more expensive countertops," Calderwood said. "Customers aren't going as much toward the high end."

Peter's True Value Hardware in Milford, Mich., where auto industry layoffs have pushed up unemployment, also has been selling more items for enjoying life at home, like backyard barbecue grills. Owner Peter Grebeck said those sales usually don't pick up until June or July.

And at Home Depot's Crescent Springs store in northern Kentucky, shopper Christian Mains, 24, of Dayton, Ky., who said he had to delay buying a new house, is focusing his spending on his current home instead.

"I'm just trying to maintain and keep up what I have until things get better," Mains said.

Retailers, service cos. gain as people stay home

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Obama Praises Cooperation on Health Care, Energy

President Barack ObamaU.S. President Barack Obama says agreement on energy legislation and progress on health care reform show that Washington is beginning to change. In his weekly address, President Obama says he is heartened by the willingness of those with differing interests to come together around common goals.Mr. Obama has met in the past few days with representatives of insurance and drug companies, as well as doctors, hospitals and labor unions, to talk about reforming health care. These groups, which have opposed many previous reform attempts, agreed to reduce the health care spending growth rate.And leaders in the U.S. House of Representatives are trying to pass a health care reform bill by the end of July. The president is applauding both efforts."That is the kind of urgency and determination we need to achieve comprehensive reform by the end of this year," he said. "And the reductions in spending the health care community has pledged will help make this reform possible."In the weekly Republican message, Congressman Charles Boustany, who is also a cardiovascular surgeon, says his party agrees with the president on the basic principles of health care reform. But Boustany says offering consumers an option for government-run health care insurance would cause medical and financial problems."Government takeover of health care will put bureaucrats in charge of health care decisions that should be made by families and doctors," he said. "It will limit treatment options and lead to rationed care. And to pay for government health care, your taxes will be raised."Mr. Obama says he is also encouraged by progress on energy legislation. After weeks of negotiations in the House, a bill has been introduced to require reductions in the gases that are blamed for global warming and increase reliance on cleaner forms of energy."For the first time, utility companies and corporate leaders are joining, rather than opposing, environmental advocates and labor leaders to create a new system of clean energy initiatives that will help unleash a new era of growth and prosperity," said the president.Mr. Obama says, taken together, the agreements on energy and health care are signs that divisions in Washington are beginning to erode."This has been an alien notion in Washington for far too long," he said. "But we are seeing that the ways of Washington are beginning to change."The president will travel to the central state of Indiana on Sunday, to deliver the commencement address at the University of Notre Dame. Some students and others plan to boycott Mr. Obama's address at the Roman Catholic university because of his support for abortion rights. 

Obama Praises Cooperation on Health Care, Energy

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Nike slashes 5 percent of global jobs

LOS ANGELES (Reuters) – Nike Inc (NKE.N) will slash 5 percent of its 35,000-strong global workforce in a sweeping overhaul to boost competitiveness.

The owner of the famous "swoosh" logo has already halted production at three of its Chinese factories and said on Thursday the cuts will include about 500 positions at its Beaverton, Oregon, headquarters.

Nike, which is trying to weather a downturn in consumer spending and streamline its sprawling operations, has remained relatively resilient during the slump.

But the company's sales declined in its most recent quarter, especially in Europe. Quarterly margins are also under pressure.

"Our new structure sharpens our consumer focus globally to drive continued growth," CEO and President Mark Parker said in a statement. "The decision to reduce our workforce has been a difficult and challenging one.

"We remain a growth company and we know these changes have created a stronger organization that will enable us to invest in our most significant opportunities."

Nike has banked on the cachet associated with its brand and a diversified portfolio to help it through the downturn.

The world's largest athletic shoe and clothing maker warned in March it would begin cutting jobs, partly to hold expenses down. It said at the time that it would cut up to 4 percent of its headcount, or about 1,400 jobs.

On Thursday, Nike said it completed a review of its operations and decided to go ahead with the layoffs, hoping to complete much of the process over the coming weeks.

The company's shares held steady in after-hours trading, with most the layoffs having been projected since February.

(Reporting by Edwin Chan; Editing by Andre Grenon)

Nike slashes 5 percent of global jobs

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Wall Street opens mixed after data

NEW YORK (Reuters) – Stocks opened mixed on Friday as investors digested a better-than-expected reading in manufacturing data and a report showing unchanged consumer prices.

The Dow Jones industrial average (.DJI) gained 21.90 points, or 0.26 percent, to 8,353.22. The Standard & Poor's 500 Index (.SPX) dropped 0.04 points, or 0.00 percent, to 893.03. The Nasdaq Composite Index (.IXIC) rose 2.38 points, or 0.14 percent, to 1,691.59.

(Reporting by Rodrigo Campos; editing by Jeffrey Benkoe)

Wall Street opens mixed after data

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Housing Crisis May Be On Verge of Recovery

New numbers suggest the U.S. housing crisis has already reached bottom and may be on the verge of recovery. The latest data from online broker ZipRealty shows housing inventory, or the number of homes for sale, declined last month in most U.S. markets, and helped stabilize prices. Financial experts say this is encouraging news and another sign that economic recovery may not be far away.  Experts say a strong housing market is key to economic recovery. And there are tentative new signs that home buyers are coming back.  Online broker ZipRealtysays not only has the number of potential buyers grown, the number of homes for sale is dropping.  "Inventory levels are actually declining during a season when it usually goes up," ZipRealty's CEO, Pat Lashinsky explains. "And median home prices of homes available for sale have actually gone up."Housing inventory helps measure the health of the market by estimating how long it will take to sell available homes. Six months is the average but ZipRealty's findings show it has declined from nearly 11 months in October 2007 to just eight and a half months in April.  Lawrence Yun, chief economist at the National Association of Realtors, says when inventory declines, prices tend to rise. 

"The fact that inventory is declining is suggesting that soon we will see home prices begin to stabilize," he said. "In some markets it may begin to turn upward. So the downturn in the housing that we've had for the past three years may be coming to an end."Lashinsky says a number of factors are motivating buyers.These include low prices, low interest rates and the Obama administration's $8,000 tax credit for first time buyers."There's an excitement and a passion that hasn't been seen in the last 18 months right now," Lashinsky said.But optimism in the housing markets does not mean foreclosures and all those "for sale" signs will disappear anytime soon. Unemployment is still high and credit remains hard to come by.But in another sign that U.S. economic troubles may be easing, Citigroup announced Tuesday, that it approved over $1 billion in residential mortgage loans - in the first three months of 2009.

Housing Crisis May Be On Verge of Recovery

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Sony Suffers First Annual Loss in 14 Years

TOKYO — Sony Corp. suffered its first annual loss in 14 years and forecast an even grimmer year ahead, hurt by a global slump in demand, cut-throat price competition and mounting restructuring costs.

Sony also said it is closing three plants in Japan in a bid to cut costs.

The Japanese electronics and entertainment conglomerate said on Thursday that it expects to book a net loss of 120 billion yen, or $1.26 billion, in the business year to March 2010, after posting a 98.9 billion yen loss for the just-ended year.

Sony blamed the slowing global economy, intense price competition and a strong yen for its ballooning losses. Annual sales fell 12.9 percent to 7.73 trillion yen, the manufacturer said in a statement.

Losses for the three months to March 2009 ballooned to 165.1 billion yen, compared to a net income of 29.0 billion yen in the previous year.

The grim numbers mark the first time Sony has tumbled into the red for the year because of troubles in its mainstay electronics business. In 1995, the last time Sony booked an annual deficit, it was its movie division – marred by box office flops and soaring costs – that helped rack up losses.

Like other Japanese electronics makers, Sony is reeling from a fall in sales across its key markets at home and overseas. A stronger yen, which erodes overseas revenue and inflates production costs at home, has also weighed heavily on its bottom line.

But those factors mask bigger problems at the Tokyo-based manufacturer. Once an electronics powerhouse and hip innovator, Sony has been usurped in almost everything it makes by rivals that offer simpler-to-use products, savvier marketing and cheaper prices.

Sony long gave up the lead in music players to Apple’s smash-hit iPod and is struggling to develop a serious competitor to the iPhone. In video game machines, Nintendo stumped Sony’s powerful PlayStation 3 with a simpler console more accessible to novice players.

In TVs, Sony trails behind Samsung Electronics, the South Korean manufacturer, which dominates key markets with a lean production setup and aggressive pricing.

One problem plaguing Sony is that it has focused too much on Japanese consumers, who are often willing to pay high prices for cutting-edge technology. Moreover, Sony makes many of its products in Japan, where production costs are high and exposed to currency swings.

Howard Stringer, who took the helm at Sony four years ago, announced a bold management reshuffle in March that consolidated power at the top and replaced old-time executives with younger faces.

Mr. Stringer has pushed for an emphasis away from hardware to networked products and services. He has talked of breaking down internal “silos” that separated various product efforts for years.

Sony is also cutting 16,000 jobs and reducing its network of 57 factories in an aggressive cost-cutting drive. Some analysts warn that these measures could further dampen innovation at the company.

Sony shares fell 6.8 percent to 2,400 yen on the Tokyo Stock Exchange before earnings were released.

Sony Suffers First Annual Loss in 14 Years

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Liberia Says Firestone Polluting Water

A worker walks among rubber trees at the Firestone rubber plantation in Monrovia, Liberia, (File)Fifty kilometers east of the capital, Harbel has always been a company town. Named after Firestone founder Harvey Firestone and his wife Idabelle, Harbel has been the center of the world's largest single natural rubber operation for more than 75 years.In a country still recovering from years of civil war and desperate for more jobs, the eight million rubber trees at Harbel are crucial to Liberia's economic future. The plantation was one of the first businesses to reopen after the fighting and employs more than 7,000 workers in a nation where 80 percent of people are unemployed.Firestone workers receive paid vacation, subsidized food, and a retirement pension along with free housing, medical care, and education for their children.But people living around the plantation say it is polluting their drinking water. John Powell is the town chief of the area known as Kpan Yah."We can't drink it now. It is really polluted," he said.Powell said villagers used to collect drinking water from the Farmington River because there are few hand pumps in the area. Now he says even the well water is contaminated, and Firestone has done nothing to help.A man drinks water from a well, near a rubber plantation on the outskirts of Monrovia, Liberia, (File)"We told the people that they polluted the water, this stream here it goes to our place. They denied the allegation. That is was not so. But now it is true to the other people who have seen it now," he added.Liberia's Environmental Protection Agency has tested the water the plantation is pumping into the river."Firestone got this pollution. It has actually taken place. It is attributable to Firestone operations," said EPA head Jerome NyenkanNyenkan said he is surprised because Firestone has a history of abiding by Liberian environmental laws."So we are shocked that this pollution would be emitted by Firestone operations. So we don't expect Firestone to escape the EPA's wrath," he said.Firestone officials at the Harbel plantation declined to be interviewed for this story. But they did provide a written statement that said the facility has recently constructed a new "state-of-the-art, multimillion-dollar water treatment facility that processes water from its factory through equalization and clarification tanks" before pumping that water into constructed wetlands on company property for "natural, biological treatment."Firestone said process water is not discharged into the Farmington River. Even so, the release said the company regularly samples water from that river to ensure compliance with recognized water quality standards from other rubber-producing countries as part of a 2008 agreement with the government in Monrovia.EPA head Nyenkan said the penalties for violating Liberia's Environmental Protection Management Law are clear."Anyone who discharges poisonous, toxic, or noxious substance into any water body leading to the death of marine creatures or even harming the human person, on conviction, that person is liable to a fine not exceeding 50,000 United States dollars or to a jail sentence not exceeding 20 years or both," he said.Firestone has extended its 99-year lease in Liberia through 2041 with an option through 2091 as part of a deal that includes promises to provide free rubber stumps to grow more trees to qualified local farmers and to sell them agricultural supplies at cost. The renegotiated lease also includes improvements in housing, education, water and sanitation.

Liberia Says Firestone Polluting Water

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