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European Central Bank Raises Rates Again MoneyNews
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The Wall Street Journal reports this morning that Morningstar will roll out some new investment-ranking services today, including a long-awaited foray into the exchange-traded fund market. The move offers more evidence that the financial services industry is changing, with new investment vehicles increasingly taking the place of the venerable mutual fund. Morningstar will begin ranking ETFs for the first time, joining Standard & Poor's in accommodating the growing number of ETF investors on the market. According to Barron's, through the end of February 2006, ETF assets surpassed $300 billion. That's three times the amount of ETF assets tallied at the end of 2002.
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Proponents call exchange-traded funds America's "next generation" of financial products and say they offer benefits like daily liquidity, low expense ratios and tax efficiency. Morningstar will use its trademark 1 to 5-star ranking system for ETFs. The company will also introduce ranking services for long-short mutual funds and for "target date" funds, which adjust investors' portfolios as they get closer to retirement. Editor's Note:
2. Spike in U.S. Car Sales Actually Hurts GM, Ford These are strange times we are living in. How else could one explain a scenario where good news for the U.S. automobile industry turns out to be bad news for General Motors and Ford Motor Co.? That's exactly what we're seeing this week, as February numbers show that U.S. auto sales grew in February, thanks primarily to increased interest in European and Asian models. A spike in sales of those cars offset negative sales for GM and Ford - both of which announced plans this week to slash North American vehicle production in the second quarter. For the month, U.S. car sales grew by 1.2%, with the seasonally adjusted sales number rising to 16.6 million autos, up from 16.4 million during the same period in 2005. "GM plans to reduce second-quarter production by 3.7% compared with the same period last year," reports The Wall Street Journal. "The company plans to produce 445,000 cars and 755,000 trucks in the quarter, compared with 458,000 cars and 789,000 trucks last year. Ford plans to reduce second-quarter production by 2% to 325,000 cars and 565,000 trucks, from 294,000 cars and 612,000 trucks produced last year." The Journal adds that the February sales figures show, once again, that Ford and GM are losing their grip on the U.S. auto market to overseas car makers like Toyota, Nissan and Honda. Even once-neglected automakers like Hyundai and Kia are grabbing market share from the two American car giants. When GM looks over its shoulder and sees Hyundai gaining on it, you know the world has turned - at least in the global auto industry. Editor's Note:
3. European Central Bank Raises Rates Again Operating just under the radar screen these days - with the U.S. Federal Reserve Bank and new chief Ben Bernanke grabbing all the headlines - the European Central Bank has hiked a key interest rate for the second time in three months. Europe has been burdened with anemic economic growth of late. But in fact, business and consumer surveys predict a strong rebound in growth for 2006. According to Bloomberg, ECB officials meeting in Frankfurt, Germany, this week boosted the refinancing rate by 2.5%, up from 2.25%. ECB watchers say that officials will raise the rate again, to 2.75%, at the ECB's meeting this June. "ECB President Jean-Claude Trichet last month signaled that the bank will raise interest rates again as export-led expansion feeds through to the domestic economy, giving companies greater leeway to raise prices. Confidence among European executives and consumers rose to the highest in five years in February," says Bloomberg. The good news is that the outlook for economic growth looks better than it has in months. Manufacturing expansion rose to heights the index hasn't seen for 19 months, Bloomberg adds, citing numbers from NTC Research Ltd.
"Sentiment surveys have been going through the roof," said Guillaume Menuet, an economist at Moody's Investors Service in London. "It's hard for them to continue containing the risks to price stability without raising rates."
According to Dario Perkins, an economist at ABN Amro Holding NV in London: "French Finance Minister Thierry Breton said Feb. 13 that 'we don't see an increase of inflation in the euro zone.' " "The ECB has irrational fears of an 'inflation monster' and that the bank is being 'too aggressive.' "
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