While you were sleeping: Executive pay controls, McDonald's profit, US jobless

Friday 23rd October 2009

The US Federal Reserve issued guidelines for executive pay at banks to ensure they don’t encourage risk taking of the kind that caused the financial crisis.

“Compensation practices at some banking organizations have led to misaligned incentives and excessive risk-taking, contributing to bank losses and financial instability,” Chairman Ben Bernanke said.

The Fed’s proposal comes as Kenneth Feinberg, the Obama administration’s so-called pay tzar, moves to enforce pay cuts of as much as 50% for top executives of seven companies that received federal aid to survive the crisis.

Feinberg, who oversees pay contracts for the 25 highest-paid employees at seven banks and automakers, said cash compensation would slump by more than 90% this year. Pay plans the companies had submitted were inconsistent with the public interest, he said.

"I am extremely sensitive to the public outrage about this," Feinberg said at a media conference.

Shares rose on Wall Street after companies including burger chain McDonald’s Corp. and insurer Travelers Cos. Posted earnings that beat estimates.

The Dow Jones Industrial Average gained 1.5% to 10,095.06, the Standard & Poor’s 500 climbed 1.1% to 1093.75 and the Nasdaq Composite rose 0.7% to 2166.04.

Travelers gained 7.6% to US$51.68 after reporting third-quarter profit quadrupled to US$935 million and raising its dividend, leading the Dow higher. McDonald’s gained 2.3% to US$45.68 after posting higher-than-expected earnings of US$1.15 a share.

EBay Inc. fell 4.1% to US$23.91 after the online auction site forecast lower-than-expected fourth-quarter profit.

White House economic adviser Lawrence Summers said the U.S. economy is headed for recovery though it would take time and jobs growth would lag, according to a Reuters interview.

US Labor Department figures showed a pick-up in new claims for unemployment assistance. Initial claims for state jobless insurance rose by 11,000 to 531,000 last week, higher than expected and the first gain in three weeks.

The Conference Board’s index of leading economic indicators rose 1% to 103.5, a two-year high. Within the data, home prices fell 0.3%.

The US dollar held at weaker than US$1.50 per euro after the jobless data stoked speculation any recovery in the world’s biggest economy will be slow.

The greenback traded at US$1.5022 per euro from US$1.5016, having exceeded US$1.50 for the first time since August last year. The yen weakened to 91.55 per dollar from 90.97. Japan’s currency fell to 137.12 per euro from 136.61.

The Dollar Index, which measures the greenback against a basket of six currencies, rose 0.3% to 75.13.

Copper fell from a 13-month high as the U.S. dollar gained, reducing the appeal of commodities as an alternative investment and amid speculation China, the world’s biggest consumer of the metal, will reduce its stimulus measures.

Copper for December delivery copper fell 1.1% to US$3.0015 a pound on the New York Mercantile Exchange.

Gold futures for December delivery fell 0.6% to US$1,058.60 an ounce in New York.

Crude oil fell after figures yesterday showed Japanese imports fell and US refineries used less of their capacity.

Crude oil for December delivery fell 1.1% to US$ $80.50 a barrel on the New York Mercantile Exchange.

In Europe, the Dow Jones Stoxx 600 fell 1.2% to 246.23. Among national benchmarks, the UK’s FTSE 100 fell about 1% to 5207.36, Germany’s DAX 30 dropped 1.2% to 5762.93 and France’s CAC 40 slipped 1.4% to 3820.85.

Ericsson, the world’s largest maker of mobile-phone networks, fell 6.2% after reporting a 71% slump in third-quarter earnings.

Air Liquide SA, the world’s biggest producer of industrial gases, fell 2.7% after reporting an 8.2% decline in third-quarter sales.

Credit Suisse Group declined 3.5% after posting quarterly earnings that beat estimates.

Logitech International, which makes computer keyboards and mice, rose 2.8% after forecasting fourth-quarter earnings growth.

Pernod Ricard gained 2.3% after the liquor company posted a smaller-than-expected decline in sales.

Businesswire.co.nz

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