February 2010 - Business

Recovery hopes lift European markets

European stock markets pushed higher Thursday as positive U.S. earnings and a fairly upbeat assessment from the U.S. Federal Reserve helped maintain optimism about the recovery in the world's largest economy.

In Europe, the FTSE 100 index of leading British shares was up 34.96 points, or 0.7 percent, at 5,311.60 while Germany's DAX rose 22.05 points, or 0.4 percent, to 5,670.39. The CAC-40 in France was 5.98 points, or 0.2 percent, higher at 3,731.19.

Wall Street, which has been buoyed in recent days by a solid batch of U.S. earnings statements, was poised for a fairly flat opening — Dow futures were up 1 point at 10,297 while the broader Standard & Poor's 500 futures were unchanged at 1,099.60.

David Jones, chief market strategist at IG Index, said much of the day's trading could hinge on whether the Dow Jones industrial average, which closed 0.4 percent higher Wednesday at 10,309.24 can sustain its break above 10,300.

"In recent weeks rallies up to here have proved to be short-lived, so a positive finish for U.S. stocks today can only add to the more upbeat outlook amongst investors at the moment," said Jones.

In the meantime, a solid earnings statement from U.S. technology firm Hewlett-Packard Co. has helped shore up markets in Europe's morning session. HP is considered a bellwether because it is the world's biggest maker of personal computers and printers. And HP's latest results are the first from a major tech company to include the full month of January.

Earnings reports that beat expectations from Deere & Co., Whole Foods Market Inc., Kraft Foods Inc. and Abercrombie & Fitch over the last two days have stoked hopes that U.S. consumer spending may be rebounding.

"The theme of global economic recovery continues as technology stalwart HP posted a solid set of earnings last night," said Ben Potter, research analyst at IG Markets.

Elsewhere, the minutes to the last Fed rate-setting meeting showed that there was a discussion about how the central bank should reel in extraordinary stimulus measures enacted over the last couple of years.

Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, disagreed, however. He argued that the recovery in the U.S. was solid enough to drop the commitment to keep interest rates low "for an extended period."

Elsewhere, fears of a Greek debt default seemed to ease somewhat, although investors remain watchful about any developments.

Richard Griffths, senior trader at Spreadex, said the volatility in the euro demonstrates "how little confidence there is in this being an end to debt problems across the EU."

By late-morning London time, the euro was down 0.1 percent at $1.3584, having fallen earlier to $1.3540, its lowest level since last Friday when the single currency was tanking after poor eurozone economic growth figures and a lack of clarity surrounding the EU's response to Greece's debt crisis.

Investors are also watching for more possible moves by the Chinese government to slow economic growth and avoid asset bubbles. China raised its bank reserves requirement last week in a bid to cool lending, but so far investors brushed off concerns this could dampen regional growth.

Markets in China and Taiwan were closed for the Lunar New Year holiday.

Earlier in Asia, South Korea's Kospi stock index dropped 6.24 points, or 0.4 percent, to 1,621.19 while Hong Kong's Hang Seng index fell 111.86, or 0.5 percent, to 20,422.15.

Singapore stocks slid 1.2 percent while Indonesia skidded 1.1 percent.

Japan's Nikkei 225 stock average closed up 28.86 points, or 0.3 percent, at 10,335.69 while Malaysia's stock benchmark added 0.1 percent.

Oil prices fell below $77 a barrel on signs gasoline and distillate demand in the U.S. remain sluggish.

Benchmark crude oil for March delivery was down 58 cents at $76.75 in electronic trading on the New York Mercantile Exchange. The contract added 32 cents to settle at $77.33 on Wednesday.

Oil above $77 amid improving US economy

Oil prices extended gains above $77 a barrel Wednesday in Asia after surging the previous day amid expectations a growing U.S. economy will fuel increased crude demand.

Benchmark crude for March delivery was up 50 cents at $77.51 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $2.88 to settle at $77.01 on Tuesday.

Oil and stocks were boosted by signs that U.S. consumer spending may be improving. On Tuesday, Kraft Foods Inc. and apparel retailer Abercrombie & Fitch reported earnings that beat expectations, helping to send the Dow Jones industrial average up 1.7 percent.

Oil prices have also been buoyed by low U.S. interest rates, as investors turn to commodities for trading profits.

"As long as short term interest rates remain near zero, a large amount of institutional capital will continue to look for a home and the energy complex remains as a compelling investment," Galena, Illinois-based Ritterbusch and Associates said in a report.

In other Nymex trading in March contracts, heating oil was up 1 cent at $2.01 a gallon, and gasoline rose 1.1 cent to $1.999 a gallon. Natural gas gained 6 cents to $5.37 per 1,000 cubic feet.

In London, Brent crude was up 40 cents at $76.08 on the ICE futures exchange.

World markets higher on earnings, growth

World stocks rose Wednesday on upbeat corporate earnings reports and as worries about Greece's debt crisis eased.

Kraft Foods Inc. and apparel retailer Abercrombie & Fitch reported earnings that beat expectations on Tuesday, while drugmaker Merck & Co. and UK banking giant Barclays also reported soaring profits. France's BNP Paribas, the eurozone's largest bank, posted its fourth straight quarterly profit on Wednesday.

That helped drive Britain's FTSE 100 benchmark index up 0.7 percent to 5,278.14 and Germany's DAX 0.8 percent higher to 5,637.88. France's CAC-40 rose 1.2 percent to 3,714.15.

Asian indexes also rose, although markets in China and Taiwan were closed for the Lunar New Year holiday, while Wall Street was expected to edge up on the open. Dow industrials futures were up 28 points at 10,269.00 and Standard & poor's 500 futures were up 5 points at 1,098.20.

Financial stocks were in demand, with BNP Paribas leading the charge with a 2.8 percent gain after its earnings statement. Italy's Unicredit Spa was up 2.9 percent and Lloyds Banking Group was up 3.0 percent.

Signs of growth in the U.S., the world's largest economy, also helped sentiment, driving Wall Street higher overnight after a manufacturing index rose. Eyes will turn to other U.S. data, including housing starts, jobless claims and inflation, as well as minutes from the Federal Reserve's latest policy meeting.

The minutes will be scrutinized for signs that the central bank is getting to ready to undo its stimulus measures and eventually raise interest rates.

Looming over markets, however, remained Greece's debt crisis and the danger of contagion to other vulnerable countries in the region. Those fears eased somewhat Wednesday, helping the euro stabilize.

After promising support but providing no details of a bailout, the EU gave Greece a month to show results in its austerity plan to cut budget spending. It also wants details by Friday on its use of swaps to manage the size of its debt in past years.

"It will be interesting to see how dominant the Greece story remains now that the deadlines have been pushed to 16 March for a timeframe of action," said Daragh Maher, analyst at Calyon.

"This could see the story fade from radar screens and allow some of the 'Greece discount' to disappear from the euro as the market obsession moves onwards temporarily at least," he said.

Earlier in Asia, Japan's Nikkei 225 stock average jumped 272.58 points, or 2.7 percent, at 10,306.83 and Hong Kong's Hang Seng index climbed 265.32, or 1.3 percent, to 20,534.01.

South Korea's Kospi gained 26.38, or 1.7 percent, to 1,627.43 while Singapore added 1.3 percent and India 1.3 percent. Australia's benchmark advanced 2.1 percent.

In the U.S. on Tuesday, the Dow rose 169.67, or 1.7 percent, to 10,268.81. The Standard & Poor's 500 index rose 19.36, or 1.8 percent, to 1,094.87, while the Nasdaq composite index rose 30.66, or 1.4 percent, to 2,214.19.

Oil prices extended gains above $77 a barrel amid expectations a growing U.S. economy will fuel increased crude demand.

Benchmark crude for March delivery was up 28 cents at $77.29 in electronic trading on the New York Mercantile Exchange. The contract rose $2.88 to settle at $77.01 on Tuesday.

The dollar rose to 90.57 yen from 90.14 yen and the euro fell to $1.3743 from $1.3764 after rallying Tuesday.

Simon Properties offers General Growth $10 billion buyout

Mall owner Simon Property Group said Tuesday that it made a $10 billion offer to acquire its ailing rival, General Growth Properties.

The real estate company said its bid totals $7 billion to creditors and about $3 billion to General Growth shareholders. Simon also said its offer might be amended so shareholders could receive Simon stock instead of cash.

The offer amounts to $9 per share for the Chicago real estate company, which filed for Chapter 11 bankruptcy protection last year. Parts of its plan to restructure $10.25 billion in debt related to 103 properties were approved in December.

Simon submitted its offer to the nation's second-largest mall owner Feb. 8. But it made the offer public Tuesday, claiming it had not yet received a "substantive response" from executives.

A spokesman for General Growth, which owns or manages more than 200 U.S. malls, had no immediate comment on the deal.

Simon, the nation's largest mall owner, is based in Indianapolis and owns more than 380 properties.

Its shares rose 23 cents in premarket trading to $72.23.

Schering-Plough purchase hikes Merck sales, profit

Drugmaker Merck & Co. on Tuesday posted huge jumps in revenue and profit for the fourth quarter, mainly due to its purchase of longtime partner Schering-Plough Corp., but announced plans for a new round of restructuring.

Merck reported net income of $6.49 billion, up from $1.64 billion a year earlier. Along with the addition of a few billion dollars in sales from Schering-Plough products, the big gain was due to $7.8 billion worth of merger-related accounting items.

Merck said its new restructuring program is expected to bring annual savings of $2.6 billion to $3 billion in 2012 — the bulk of its previously announced plan to produce $3.5 billion in synergies by 2012, one of the goals of the merger. The combined company had about 100,000 employees as of Dec. 31 and expects companywide cuts to reduce that by about 15 percent. Another 2,500 jobs now vacant will also be eliminated.

Sales jumped to $10.09 billion from $6.03 billion in the fourth quarter of 2008, fueled by the addition of Schering-Plough products such as allergy medicine Nasonex and higher sales for Merck vaccines and some of its top-selling drugs. Those included asthma and allergy pill Singulair and blood pressure pills Cozaar and Hyzaar.

The Whitehouse Station, N.J., company reported earnings per share of $2.35, or 79 cents excluding all the one-time items. Analysts surveyed by Thomson Reuters were expecting earnings per share of 79 cents, which Merck matched, and slightly lower revenue of $9.7 billion.

The items included a $7.5 billion accounting adjustment from gaining a controlling interest in its partnership with Schering-Plough and a $3.2 billion gain for selling its part of an animal health business to get regulators' approval for the acquisition.

The one-time costs and gains, which also included Merck's ongoing job cuts and other restructuring, amounted to after-tax charges of $4.32 billion, or $1.56 per share.

The report is the first since Merck bought Schering-Plough in November for $41.1 billion, making the combined operation the world's second-biggest pharmaceutical company, behind Pfizer Inc.

"The new Merck is off to an excellent start," Chief Executive Richard T. Clark said in a statement. "We're building momentum in our business while making great progress on integration."

Clark said the company's expanded product portfolio now includes 10 brands with annual sales of more than $1 billion. He noted Merck now is launching a number of new products in major markets around the world and plans more later this year.

For the full year, Merck reported net income of $12.9 billion, or $5.65 per share. That was up 65 percent from $7.81 billion, or $3.63 per share. Revenue climbed 15 percent to $27.43 billion from $23.85 billion.

In premarket trading, Merck shares changed hands at $37.80, up 88 cents, or 2.4 percent, from Friday's close.

White House defends year-old stimulus

President Barack Obama, defending his economic stimulus plan on its first anniversary, is dispatching his Cabinet across the country to try to calm an anxious public as Democrats head into potentially devastating midterm elections.

A weeklong push to highlight the stimulus program's first year was starting with a Tuesday trip by Vice President Joe Biden to hard-hit Saginaw, Mich., to tour a small business, a jobs training program and a solar factory that all received Recovery Act dollars.

Obama's fellow Democrats planned to tout programs putting people back to work under the $787 billion spending bill. Health and Human Services Secretary Kathleen Sebelius was touring a medical center in Atlanta on Tuesday; Homeland Security Secretary Janet Napolitano was promoting stimulus projects in Virginia and Texas the same day.

In all, senior administration officials are scheduled to visit 35 communities before Friday to counter Republican claims the massive deficit-spending program has failed. Obama plans to surround himself at the White House on Wednesday with people who have jobs because of the stimulus plan, then travel to Colorado and Nevada.

Obama's political team believes the bricks-and-mortar projects across the country could help Democrats stave off emboldened Republicans and their attempts to reclaim majorities in Congress. Although voters have soured on the stimulus spending, individual components have fans across party lines.

The tax cuts Democrats included in their bill have the backing of 70 percent of the public, according to a CNN poll last month. Another 80 percent support the infrastructure investments, such as the water projects Environmental Protection Agency chief Lisa Jackson plans to tout in Columbus, Ohio, on Thursday.

Even so, 56 percent of the public opposes the broad plan, according to the CNN poll.

Biden is expected to give Obama a report Wednesday assessing the stimulus' effects.

European markets edge up despite Greek debt fears

European stock markets won some respite Monday ahead of a meeting of eurozone finance ministers in Brussels, where the Greek debt crisis will inevitably top the agenda. Public holidays in Asia as well as the U.S. have kept volumes low.

The FTSE 100 index of leading British shares closed up 25.02 points, or 0.5 percent, at 5,167.47 while Germany's DAX rose 10.71 points, or 0.2 percent, at 5,511.10. The CAC-40 in France was 11.27 points, or 0.3 percent, higher at 3,610.34.

And with Wall Street closed Monday for the Presidents Day holiday, investors held back from launching a new attack on the euro, which remained steady over the day around the $1.36 mark. Last week, at the height of the Greek fiscal concerns, the euro had slid to a nine-month low of $1.3533, way down on December's high above $1.50.

The main point of interest in the markets continues to be the debt problems afflicting Greece, as finance ministers from the 16 euro countries gather in the wake of last Thursday's meeting of EU leaders. On Tuesday, the finance ministers of the full 27-nation European Union meet.

Though EU leaders gave Greece some vocal support, no money or guarantee was offered, primarily because Germany was not willing to stump up cash as that could undermine German bonds and put further pressure on the euro.

Instead, all agreed that Greece's progress in bringing down its budget deficit will be closely monitored and it would not be allowed to threaten the eurozone. Markets interpreted the latter comment as an implicit guarantee that eurozone policymakers will help the country if its own efforts fail.

An ensuing narrowing in spreads between German and Greek bonds — a sign that the markets think a Greek default is becoming less likely — and a more steady tone to the euro have diminished expectations that anything substantially new will emerge later.

Frederik Ducrozet, eurozone economist at Credit Agricole, said last Thursday's EU statement was interpreted as a "major commitment" to support Greece to avoid possible contagion risks to other countries like Portugal and Spain.

Greece's finance minister George Papaconstantinou said Monday that a detailed rescue plan from other eurozone nations would be the best way to soothe market fears that Greece could default on debt payments.

"My guess is that what will stop markets attacking Greece at the moment is a further more explicit message that makes operational what has been decided last Thursday," he said.

Dubai is also a growing market concern amid fears that the highly indebted emirate may repay creditors less than the amounts due — it was November's debt postponement from Dubai World, a government investment company with around $59 billion in debts, that stoked the markets' concerns about overborrowed countries.

Dubai's stock market fell sharply while the cost of insuring against the emirate's debts edged back up.

"The theme of sovereign debt risk is likely to remain on investors' agenda as fresh rumblings in Dubai make clear," said Neil Mackinnon, global macro strategist at VTB Capital.

Earlier, much of Asia was closed for the Lunar New Year holiday, including Hong Kong, Shanghai, Singapore and Seoul.

However, Japanese and Australian markets fell as investors reacted to China's move late Friday to curtail bank lending to cool off strong growth there.

Better-than-expected Japanese fourth quarter economic growth figures failed to lift Tokyo's benchmark Nikkei 225 index, which slid 78.89 points, or 0.8 percent, to close at 10,013.30. Analysts said that the monetary tightening in China — the second such move in a month — and uncertainty about the economic outlook in coming quarters weighed on sentiment.

Japan's gross domestic product grew at an annual pace of 4.6 percent in the October-December period, keeping Japan just ahead of China as the world's No. 2 economy. Japan's nominal GDP for the 2009 calendar year came to about $5.1 trillion, ahead of China's $4.9 trillion.

Australia's benchmark S&P/ASX200 fell 16.6 points, or 0.4 percent, to 4,545.5.

Wall Street is closed for the Presidents Day holiday.

Elsewhere, oil prices were flat, with benchmark crude for March delivery down 18 cents to $73.95 a barrel.

Toyota studies electronics again, trip undecided

Toyota has still not decided whether its president will appear before the U.S. Congress, the automaker said Monday, but it promised to again look into possible electronic problems with its vehicles.

Toyota Motor Corp. has been criticized as being slow in responding to the unfolding recall crisis, which has ballooned over the past four months to 8.5 million vehicles globally with problems in gas pedals, floor mats and braking.

Calls have been growing for Toyota President Akio Toyoda to answer questions from U.S. lawmakers. Toyoda told reporters last week that he planned to go to the U.S., mainly to talk to American workers and dealers.

Toyota said details for his trip were still being worked out, and it was unclear when a decision could come.

In Washington, Republican Representative Darrell Issa has said Toyoda should testify before the House Oversight and Government Reform Committee on Feb. 24. The hearing was scheduled for Feb. 10, but postponed because of a snowstorm.

In a letter to the committee last week, Toyota's attorney Theodore Hester said the company carried out "exhaustive and robust" tests, and does not think there are any electronics problems with its vehicles, but promised to look into it again.

"In the spirit of the recent commitment made by Mr. Toyoda that our company will review all safety issues and potential safety issues with renewed vigor, we will be re-examining these complaints," it said of the sudden acceleration complaints.

In Japan, where brand loyalty to Toyota remains relatively strong, the world's biggest automaker has been trying to send a message of remorse to assuage consumers as well.

On Monday, it rolled out a new Japan compact model called Passo without the usual fanfare for Japanese automakers, such as an unveiling ceremony with entertainment and a news conference by executives.

Toyota suddenly canceled the planned event last week, acknowledging celebration was inappropriate amid the recalls.

Toyota in Tokyo said it had not yet received a notice from U.S. federal authorities about the growing fears the series of recalls may next expand to the Corolla.

"We have yet to be contacted by the NHTSA regarding what has been reported in the press about a power-steering issue in the Corolla," said Toyota spokesman Paul Nolasco. "Should we be contacted about any investigation by NHTSA related to any of our products, we will cooperate fully.

NHTSA has said it is looking into complaints from drivers about difficulty with the steering in 2009 and 2010 Corollas, which say they can wander while driving on highways.

Federal officials routinely look into such complaints, and there is no reason to think a Corolla recall may be imminent. But Toyota's safety woes are drawing intense scrutiny these days.

In addition to the Feb. 24 hearing, the House Energy and Commerce Committee has scheduled a Feb. 25 hearing with Toyota Motor North America chief executive Yoshi Inaba, Transportation Secretary Ray LaHood and National Highway Traffic Safety Administration Administrator David Strickland.

The Senate Commerce, Science and Transportation Committee has scheduled a March 2 hearing.

Oil sinks below $74 as US crude demand eyed

Oil prices sunk below $74 a barrel Friday as the dollar strengthened and investors awaited a weekly crude supply report that could reflect sluggish U.S. demand.

By early afternoon in Europe, benchmark crude for March delivery was down $1.50 at $73.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 76 cents to settle at $75.28 on Thursday.

With U.S. financial markets to be closed Monday for a holiday, analysts said the dollar's exchange rate and global stock markets would likely steer oil prices Friday.

A stronger dollar makes oil more expensive for investors holding other currencies and the greenback made gains on the euro Friday as the European Union dithered over how to aid Greece, beset by solvency problems.

"The heads of Europe have not been able to produce more than air to lift Greece ... and this is maintaining pressure on the euro," said Olivier Jakob of Petromatrix in Switzerland.

The euro was down at $1.3548, a nine-month low, in afternoon trading from $1.3686 late Thursday in New York.

The Energy Information Administration is scheduled to release its weekly U.S. crude inventory report later Friday. Earlier figures from the American Petroleum Institute showed crude stocks rose 7.2 million barrels last week, suggesting U.S. demand remains weak as the economy emerges from last year's recession.

"We would expect to see another large stock build in next week's report due to the snow disruptions" on the U.S. East Coast, Jakob said.

The Paris-based International Energy Agency said on Thursday that oil demand in North America has "virtually stalled," but that consumption in developing countries would help offset that and help boost overall global demand this year.

In other Nymex trading in March contracts, heating oil fell 2.92 cents to $1.9338 a gallon, and gasoline dropped 2.77 cents to $1.9080 a gallon. Natural gas dropped 4.3 cents to $5.353 per 1,000 cubic feet.

In London, Brent crude was down $1.27 at $72.85 on the ICE futures exchange.

Jobless claims figures raise hopes for recovery

The number of newly laid-off workers seeking unemployment benefits fell more than expected last week to the lowest total in a month, a sign the job market may be improving.

The Labor Department said that first-time claims for unemployment insurance dropped by 43,000 to a seasonally adjusted 440,000. Wall Street economists expected a smaller decline of 15,000, according to a survey by Thomson Reuters.

The jobless claims report was the first of the year that wasn't affected by a holiday backlog. The easing of the backlog had elevated the numbers for the previous three weeks. The latest figures likely provide a clearer picture of the job market.

And they raise some hopes for the economic rebound.

"The recovery is slowly taking root," Diane Swonk, chief economist at Mesirow Financial, wrote in a research note.

Still, she added, "Any gains we see are likely to remain muted given the depth of the losses we endured, especially when it comes to jobs."

And the jobs outlook is about to get muddy again.

The unemployment claims numbers for this week that will be reported next week will likely be affected by the closing of businesses and government offices due to the snowstorms in the Mid-Atlantic region.

This week is also the period when the government gathers information for the February report on the unemployment rate and employer payrolls. The severe weather may distort those figures, too, economists said. That could make it hard to get an accurate picture of the job market for several weeks.

The snowstorms could cost the economy more than 100,000 jobs in February, according to Carl Riccadonna, senior U.S. economist at Deutsche Bank. Construction companies and retailers may hire fewer people. And government hiring for the 2010 Census could also be delayed, he said.

The weather will likely disrupt other economic indicators, in addition to employment data. These include retail sales, industrial production, housing starts and construction spending.

"It's going to throw a monkey wrench into the whole forecasting process," Riccadonna said.

Economists may have to wait until March figures are reported in April to get a truer picture of the economy.

Still, severe weather events don't generally knock the economy off track, Riccadonna said. So any declines in February will likely be reversed in March.

The four-week average of jobless claims fell by 1,000 to 468,500. It was the first drop after three weeks of increases. Many economists say the four-week average would need to fall consistently below 425,000 to signal that the economy will start generating net job gains.

First-time claims are now close to the low levels they reached in late December, when they dropped to their lowest point in nearly 18 months.

Still, jobs remain scarce. The Labor Department said last week that the unemployment rate fell to 9.7 percent from 10 percent. But most analysts expect it to remain near 10 percent through the end of the year.

The Obama administration estimated Thursday that the economy will generate an average of 95,000 jobs a month this year. That wouldn't be enough to drive down the jobless rate, which the administration predicts will stay near 10 percent through year's end.

Employers cut a net total of 20,000 jobs in January, the Labor Department said last week.

The number of people claiming benefits for more than a week, meanwhile, fell by nearly 80,000 to 4.5 million. That was a steeper decline than expected.

But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

Nearly 5.7 million people were receiving extended benefits in the week ended Jan. 23, the latest data available, down from nearly 5.9 million the previous week. The extended benefit data isn't seasonally adjusted and is volatile from week to week.

Among the states, Pennsylvania reported the largest increase, of nearly 10,500, which it attributed to layoffs in the construction and service industries. Illinois, North Carolina, Georgia and Missouri had the next largest increases.

New Jersey reported the largest drop, of 1,819, which it said was due to fewer layoffs in services. Kansas, Connecticut, Virginia and Puerto Rico had the next largest drops.

AutoNation reports earnings beat, Toyota progress

AutoNation Inc (AN.N), the largest U.S. auto dealership group, on Thursday posted quarterly results that exceeded analysts' expectations and said Toyota Motor Corp was making progress in its repair program.

The dealership group, whose shares were up 1.4 percent in premarket trade, also said that a fourth-quarter increase in new vehicle sales revenue, its first in five years, provided evidence that the U.S. economy was in a gradual recovery.

AutoNation expects the impact on its earnings from Toyota's (7203.T) massive recall campaign to be less than 1 cent per share in the first quarter and nil in the second quarter, Chief Executive Mike Jackson said.

"February will be a disrupted month from a sales point of view," Jackson told Reuters in a telephone interview.

However, sales should hit their "stride again in March, April and in that period of time Toyota should have recovered the majority of share it has lost during this disruptive period," Jackson said.

He said AutoNation had already repaired accelerator pedals for customers who showed the greatest concern and had repaired about 25 percent of the dealer Toyota inventory and resumed sales of some new Toyota vehicles.

AutoNation expects to have completed repairs on all of its dealer inventory within a week to 10 days, Jackson said.

"It will take several months to repair all of those vehicles of customers who schedule appointments and come in and then we will have to have a significant effort to try to encourage everyone to come in," Jackson said.

Net income slipped to $61.7 million, or 35 cents per share, in the fourth quarter, from $67.1 million, or 38 cents per share, a year earlier. Revenue rose 8 percent to $2.8 billion.

Excluding one-time items, AutoNation reported earnings from continuing operations of 29 cents per share. Analysts on average expected 27 cents, according to Thomson Reuters I/B/E/S.

AutoNation reported a fourth-quarter year-over-year increase in new vehicle sales revenue for the first time in five years, providing more evidence that the U.S. economy is in recovery, Jackson said.

"We have a bottom," he said. "The first signs of the recovery have begun. The absolute level of sales are still low in historical terms, but they are moving in the right direction."

AutoNation expects U.S. auto industry sales of about 11.5 million vehicles in 2010, representing about a 15 percent increase over 2009 excluding the U.S. government "cash for clunkers" program that propped up sales last year, Jackson said.

Shares of AutoNation were at $18.49 in premarket trade, up from $18.43 at the close Wednesday on the New York Stock Exchange.

Credit Suisse says at strongest since crisis hit

Credit Suisse (CSGN.VX) boss Brady Dougan said the Swiss bank was winning client money and transactions faster than at any point since the financial crisis began, putting a positive sheen on weak quarterly earnings.

Investors welcomed Dougan's upbeat comments after initial disappointment that fourth-quarter earnings missed forecasts on Thursday as investment banking slowed and came in below arch-rival UBS' (UBSN.VX)(UBS.N) fourth-quarter net profit.

Credit Suisse, which unlike UBS weathered the global crisis without state aid, has rebounded under the leadership of former investment banker Dougan. It posted a 6.7 billion Swiss francs ($6.3 billion) profit in 2009 from a 2008 record loss, mostly due to its best-ever investment banking performance.

"Perceptions on Credit Suisse have improved a lot, and it was clear things were better in January," said fund manager Helmut Hipper at Union Investments, which holds more than 3 million shares in Credit Suisse, or 0.28 percent of shares.

"The numbers were a little disappointing, very weak on sales and trading, in fixed income especially, although they made up some ground on costs," Hipper said.

Shares were up 1.3 percent 46.71 francs by 1224 GMT (7:24 a.m. EST) on Thursday, compared with a 0.72 percent fall in the DJ Stoxx European banking index (.SX7P) while UBS shares were up 0.44 percent.

Credit Suisse's fourth-quarter bottom line was hit by weaker results at its investment bank. Profit from the division nearly halved from the third quarter as trading profit in equities slowed and shrunk to a third in fixed-income due what division chief Paul Calello said was "low client activity."

That follows weaker trading profits at both JP Morgan (JPM.N) and Goldman Sachs (GS.N), indicating conditions weakened at the end of 2009.

The bank's fourth-quarter net profit was the weakest of all quarters last year, but American-born Dougan was confident for 2010.

"We have a had a strong start to the quarter with strong client activity. Our transaction pipeline and net new asset flows are the best we have seen since the crisis," he said.

Despite a weakening of Swiss bank secrecy and attacks from foreign states on Switzerland's multi-trillion dollar offshore banking industry, Credit Suisse continued to attract cash from wealthy clients throughout the year, although inflows slowed in the fourth quarter after an Italian tax amnesty.

Dougan said Credit Suisse could loose a maximum of 25 billion francs if other major European countries were to conduct tax amnesties as aggressive as the Italian one.

Dougan also disclosed for the first time that the bank held around 100 billion francs of potentially undeclared tax money from Italian, German, French and British clients, or just over 10 percent of the 915 billion francs its private bank manages.

Credit Suisse, now Switzerland's largest by market value, has managed to raise private capital during the crisis, slash exposure to illiquid assets, boost its capital ratios and is exiting the most risk-prone segments of investment banking.

WEAK FOURTH QUARTER

Fourth-quarter profit of 783 million francs was below expectations of 1.3 billion in a Reuters poll.

UBS surprised the market on Tuesday when its first quarterly profit in more than a year came in at 1.2 billion francs, well above expectations, though the fourth-quarter figure was overshadowed by accelerating outflows from its core wealth-management division.

"Fourth-quarter results are definitely weaker than expected, but a very strong beginning of the year, including net new money, indicates they may be able to gain market share," said Georg Kanders, an analyst at WestLB Research.

Credit Suisse' net was hit by a 500 million franc pretax charge following a U.S. settlement for hiding transactions on behalf of clients from countries subject to U.S. sanctions like Iran. A recurring accounting loss on own credit to the tune of 300 million francs also took its toll.

Even though Credit Suisse continued to win client money in the fourth quarter, new client inflows of 6.5 billion francs were below analyst's expectations of 8 billion and lower than in all previous quarters of the year due to the Italian tax amnesty.

Credit Suisse has capitalized on its main rival's weakness and won market share, attracting more than 42 billion francs of new client money in private banking in 2009 against an outflow of nearly 150 billion francs UBS suffered in the same year.

January had been a record month for inflows, the bank said.

"We continue to see wealth management as an attractive growth market," Chief Financial Officer Renato Fassbind said.

First-time jobless claims fall more than expected

The number of newly laid-off workers seeking unemployment benefits fell more than expected last week to the lowest total in a month as states cleared out administrative delays left over from the Christmas holidays.

The Labor Department said that first-time claims for unemployment insurance dropped by 43,000 to a seasonally adjusted 440,000. Wall Street economists expected a smaller decline of 15,000, according to a survey by Thomson Reuters.

A Labor Department analyst said the decline largely reflects the end of administrative backlogs in California and other states that had elevated claims in the previous three weeks.

The winter storms that have pounded the Mid-Atlantic took place after last week's claims were filed, the analyst said. If they have an effect, it won't be evident until next week's data.

The four-week average fell by 1,000 to 468,500, the first drop after three weeks of increases.

Claims are now close to the low levels they reached in late December, when claims dropped to their lowest point in nearly 18 months. That is likely to raise hopes that the job market is improving.

The number of people claiming benefits for more than a week, meanwhile fell by nearly 80,000 to 4.5 million. That was a steeper decline than expected.

Bernanke outlines plan for pulling in stimulus aid

Federal Reserve Chairman Ben Bernanke began Wednesday to outline the central bank's strategy for reeling in stimulus money once the economic recovery is more firmly rooted.

Bernanke said the Fed will likely start to tighten credit by boosting the interest rate it pays banks on money they leave at the central bank. Doing so would raise rates tied to commercial banks' prime rate and affect many consumer loans. Companies and ordinary Americans would pay more to borrow.

But in prepared remarks to a House committee, Bernanke indicated the Fed is still months away from raising rates or draining most of the stimulus money it injected to rescue the financial system. He said the recovery still needs support from record-low interest rates.

The Fed chief used his remarks to explain how the central bank will try to withdraw the stimulus money without tipping the economy back into recession.

Using the rate it pays on banks' excess reserves to affect credit would be a new strategy for the Fed. Since the 1980's, its main lever to tighten or loosen credit has been the federal funds rate. That rate is now at a record low near zero.

The rate paid on banks' excess reserves is 0.25 percent. Boosting that rate would give banks an incentive to keep money parked at the Fed, rather than lend it.

It also would cause the funds rate to rise, economists say. Adjusting the interest paid on banks' excess reserves helps stabilize the funds rate when the financial system is awash in cash, as it is now.

Paying interest on the reserves is a relatively new tool for the Fed, having been authorized by a 2008 law. Many foreign central banks rely on it. The Fed started paying interest on the reserves at the height of the financial crisis in October 2008.

In his prepared remarks to the House Financial Services Committee, Bernanke lays out his most extensive details to date on the Fed's exit strategy from record-low rates and economic stimulus.

Under the threat of a major snowstorm, the panel postponed its hearing scheduled for Wednesday. The hearing was intended to review the Fed's plans for withdrawing its emergency supports. Bernanke chose to release the prepared testimony.

Deciding when and how to remove all the stimulus is the biggest challenge for Bernanke in his second term, which started last week. Reeling in the stimulus too soon risks short-circuiting the recovery. That could send unemployment up.

Yet the Fed keeps its stimulus measures in place for too long, they could help unleash inflation.

Bernanke repeated the Fed's pledge to hold rates at record lows for an "extended period." Economists think that means for at least six more months. But Bernanke cautioned that the Fed eventually will need to raise rates to ease inflationary pressures.

Even before the Fed raises the rate paid on banks' excess reserves, it could raise the rate it charges banks for emergency loans, Bernanke said. That rate, called the discount rate, is 0.50 percent. An increase in the discount rate wouldn't affect interest rates charged to consumers and businesses. But Bernanke said it would help normalize the Fed's interest rate policy now that the worst of the financial crisis has passed.

He said he expected the Fed to consider a "modest" increase to the discount rate. Such a move would not raise rates for households and businesses and would not signal any change in interest-rate policy, Bernanke said.

The Fed is still weighing the order of steps it can take to reel in the stimulus.

Under one scenario, the Fed would first use its tools to drain money from the financial system. Then it would start pushing up rates throughout the economy by boosting the rate paid on banks' excess reserves, Bernanke said.

But if a faster exit is needed, the Fed could raise the rate on reserves even as it's using its other tools to pull money from the financial system.

The Fed is fine-tuning one tool to withdraw money: By selling securities from its portfolio with an agreement to buy them back later. Those operations are called reverse repurchase agreements.

And the Fed is moving ahead on a proposal to let banks to set up the equivalent of certificates of deposit at the central bank. This, too, would help the Fed mop up money pumped into the economy and prevent inflation from flaring later.

Greece leads markets higher amid EU rescue hopes

Greek shares led world markets higher Wednesday amid mounting hopes that German opposition to a European Union financial rescue package for the heavily indebted country is waning.

European markets climbed higher following big gains Tuesday on Wall Street and an earlier advance in Asia.

The FTSE 100 index of leading British shares was up 29.97 points, or 0.6 percent, at 5,141.81 while Germany's DAX rose 49.54 points, or 0.9 percent, at 5,547.80. The CAC-40 in France was 30.58 points, or 0.9 percent, higher at 3,643.34.

Greek shares led the advance in Europe, with the main composite index up 4.4 percent at 1,979. Stock markets in Spain and Portugal — two countries with similar problems to Greece — were also 2 percent higher.

The more optimistic tone in stock markets this week has largely arisen from hopes that Thursday's meeting of European Union leaders in Brussels will agree some sort of financial support for Greece, which has been struggling to reassure markets that it can get a grip on its massive borrowings amid a nationwide strike Wednesday.

EU leaders will be joined by European Central Bank president Jean-Claude Trichet and the debate is likely to center on how to ring-fence the problems in Greece so they don't start to undermine other countries as well as the euro.

"If, and it remains a reasonable 'if' this happens tomorrow, the commitment will have to be strong enough to placate markets while retaining a pretence that this is not tantamount to a bailout," said Daragh Maher, an analyst at Calyon Credit Agricole.

"In the end, the EU either directly or through a promise of conditional support may well end up being Greece's saviour, but many will wonder if this will leave this knight in shining armour looking a little tarnished," he added.

Crucial to any deal is the position of Germany, the eurozone's biggest economy, and the signs are that there's a growing acceptance within Chancellor Angela Merkel's government that Germany will have to step up to the plate to stave off this crisis that could spread like wildfire.

Germany is reportedly looking at ways to help Greece by either backing a plan for a loan package from the EU or some sort of guarantee of Greece's debt position.

Hopes that Germany will back a rescue deal have also given Greek bond prices some support. On Tuesday the spread between Greek and German 10-year yields dropped by 47 basis points — a clear sign that investors think a default is less likely.

"The respite provided by the temporarily improving conditions in the bond markets gave some much needed impetus for equities, which in recent sessions have wanted to give up the ghost," said David Buik, markets analyst at BGC Partners.

The euro has also managed to steady and was trading flat at $1.3790.

Earlier in Asia, Japan's Nikkei 225 index closed 0.3 percent higher at 9,963.99 while Hong Kong's Hang Seng rallied 0.6 percent to 19,922.22.

Australia's benchmark gained 0.2 percent to 4,513.40 while China's Shanghai index advanced 1.1 percent to 2,982.50, helped by strong trade figures for January — indicating a recovery in both global demand and Chinese consumption is on track.

"We can see China's trade has entered a stable stage," said Shanghai Securities economist Hu Xiaoyue. "Unless there's another round of the financial crisis, China's export recovery is well on track and won't see a double dip."

Markets in India, Taiwan, Malaysia and Indonesia also gained.

Only South Korea bucked the regional trend with the Kospi index slipping 0.37 point, less than 0.1 percent, to 1,570.12.

Wall Street was poised for a flat opening after big gains on Tuesday when the Dow Jones industrial average rose 150.25 points, or 1.5 percent, to 10,058.64, its biggest percentage gain since Nov. 9. The broader Standard & Poor's 500 index rose 13.78, or 1.3 percent, to 1,070.52, while the Nasdaq composite index rose 24.82, or 1.2 percent, to 2,150.87.

Oil prices fell modestly with benchmark crude for March delivery down 24 cents at $73.51 a barrel after U.S. crude supplies rose last week.

Europe searches for way out of debt crisis

The euro is under siege — and the next few days will be crucial.

Financial markets are betting heavily that Greece's crushing debt could drag down the entire eurozone, and that could force reluctant EU leaders into an embarrassing bailout.

If EU leaders don't take some kind of decisive action this week at their summit meeting, the euro could continue its slide — and Greece's economic woes could spread to other flailing countries in the 16-nation eurozone like Portugal, Spain or even farther to heavily indebted Italy and Belgium.

European Union leaders will issue a statement on Greece after the meeting, officials said Tuesday, but added the contents had not yet been discussed and would not say if it would lay out details of a bailout.

"Thursday's EU summit is the real litmus test," said VTB Capital analyst Neil MacKinnon. "If it fails to come up with any debt restructuring package or a quasi-bailout, then the pressure on the euro will increase."

Investors have turned increasingly pessimistic on the outlook for the euro, so much so that speculative traders' short positions, or bets against the single currency, have reached a record high, said MacKinnon.

While some of those short trades, reported by the U.S. Commodity Futures Trading Commission, will have been unwound — the euro was in fact up somewhat Tuesday — the data suggests market sentiment is at a turning point.

On Tuesday, a new commission — the EU government — was to be formally approved by the European parliament, and must immediately confront a gathering sense that the euros fundamental weakness — no common fiscal policy for its wildly diverse economies — has been exposed.

A bailout would be a blow to monetary union by showing that the framework set up to support it was insufficient to ward off a crisis. With budgets in the hands of 16 separate governments, the euro relies on a set of rules limiting deficits to 3 percent of gross domestic product. Large deficits can undermine a currency.

Continued market skepticism about government finances could mean Greece and other troubled countries will have to pay higher interest rates to borrow. That would intensify austerity measures — less spending and more taxes — that in turn will mean less money in many workers pockets, particularly in the public sector, as well as less stimulus for flagging growth.

The European Union's own government-backed lender said Tuesday that its rules do not permit it to bail out Greece or any other European country that can't pay its debts, narrowing leaders' options.

The euro is now trading near an eight-month low against the U.S. dollar on worries about Greece. European stocks inched up on Tuesday, and the euro rose by three-quarters of a cent to $1.3725, on speculation that heads of state and government will have to announce something at Thursday's summit. The euro was as high as $1.51 in December.

The bounce followed news that European Central Bank President Jean-Claude Trichet had left a banking conference in Australia to attend the summit, stoking expectations of some kind of backstop for Greece.

Some were skeptical the meeting could stop the slide in sentiment. "To be sure, markets will be looking to Thursday's EU leaders's meeting for answers, but we'd be greatly surprised if those meetings concluded in a manner which deminished market concerns about the matter."

Jittery markets are piling the pressure on EU nations to state clearly what they would do if a euro member is likely to default. Officials have not managed to calm these market worries with repeated assurances from both the EU and the Greek government that Greece can pull itself out of its debt crisis with a harsh austerity program of cuts to public spending that have already triggered strikes and protests.

Greek Prime Minister George Papandreou held government talks Tuesday on accelerating those cuts with reforms to pensions and wages — an effort to prove to markets that Greece can and will make long-term spending reductions and not need a bailout.

The EU's executive commission has backed the Greek program and says no bailout will be needed. European Union nations say the same, rejecting reports that they are talking about possible bailout plans.

The bailout options are limited — but not impossible.

European Union agencies — such as the European Commission — can't take on debt for governments. Neither can the EIB, it said. It has euro75 billion ($103 billion) to lend for infrastructure and economy projects, usually in poorer EU nations.

Three EU members that don't use the euro — Hungary, Latvia and Romania — have secured bailouts from the International Monetary Fund and the EU. But EU officials say that IMF help won't be needed for a euro country.

That leaves the ball in the court of EU governments. Legally, governments can do it if a member state "is seriously threatened with severe difficulties caused by ... exceptional occurrences beyond its control."

What remains is deciding how to do it — and what taking on Greek debt could do to richer nations.

EU governments could cut the costs of Greek spreads overnight by agreeing to jointly underwrite Greece's debt — but this could hike the cost of their own borrowings.

They could also provide a loan to Greece — but it is uncertain that they could or would provide enough to give Greece some long-term relief. Greece is looking to borrow some euro51 billion from bond markets to pledge its budget gap this year.

Another option would be bonds, issued jointly by European governments to raise money from markets. EU and ECB officials have talked this down but European socialists are keen — including Greece's current government — because it could ease harsh spending cuts.

What is clear is that EU governments do not want to let Greece off the hook — and that any option would force Greece to make long-delayed reforms to rife tax evasion, rigid labor market rules and an inefficient and high-spending pension and health care system.

Toyota recalls 437,000 Priuses, hybrids globally

Toyota is recalling 437,000 Prius and other hybrid vehicles worldwide to fix brake problems — the latest embarrassing safety lapse at the world's largest automaker.

"I don't see Toyota as an infallible company that never makes mistakes," President Akio Toyoda said at a news conference Tuesday. "We will face up to the facts and correct the problem, putting customers' safety and convenience first."

The number of vehicles recalled globally by Toyota Motor Corp. now has ballooned to 8.5 million, including for floor mats that can trap gas pedals and faulty gas pedals that are slow to return to the idle position. The 2010 model of the Prius — the world's top-selling hybrid and Japan's top-selling car — wasn't part of the earlier recalls.

There have been about 200 complaints in Japan and the U.S. about a delay when the brakes in the Prius were pressed in cold conditions and on some bumpy roads. The delay doesn't indicate a brake failure. The company says the problem can be fixed in 40 minutes with new software that oversees the controls of the antilock brakes.

"Let me assure everyone that we will redouble our commitment to quality as the lifeline of our company," Toyoda said.

U.S. Transportation Secretary Ray LaHood said in a statement Tuesday that Toyota's leaders have assured him they are taking safety concerns "very seriously." The statement said LaHood's agency will stay in constant communication with Toyota to hold the company to its promise.

Also, State Farm, the largest auto insurer in the U.S., said it alerted federal regulators late in 2007 about a rise in reports of unexpected acceleration in Toyota vehicles. Congressional investigators are looking into whether the government missed warning signs.

Toyota officials went to Japan's Transport Ministry earlier Tuesday to formally notify officials the company is recalling the 2010 Prius gas-electric hybrid. The automaker is also recalling two other hybrid models in Japan, the Lexus HS250h sedan, sold in the U.S. and Japan, and the Sai, which is sold only in Japan.

The 223,000 cars being recalled in Japan include nearly 200,000 Priuses sold from April last year through Monday, according to papers the automaker filed with the ministry.

In the U.S., Toyota will recall 133,000 Prius cars and 14,500 Lexus HS250h vehicles. Nearly 53,000 Priuses are also being recalled in Europe. Toyota is suspending production of the Sai and Lexus HS250h in Japan until the updated software for those models is ready.

If drivers experience a delayed reaction when depressing the brakes in any of these models, they should keep pressing, according to Toyota and the transport ministry.

The Prius repairs will start in Japan on Wednesday. U.S. owners will start receiving letters about the recall next week.

Toyoda, the president, has been criticized for being largely invisible during the two weeks after the company announced Jan. 21 the gas pedal recall in the U.S., Europe and China.

He apologized at his first public news conference last Friday, but was criticized by the Japanese media for failing to outline concrete steps to tackle the safety crisis and reassure customers.

In contrast to his halting English in response to questions from foreign reporters at last week's news conference, Toyoda seemed much better prepared Tuesday, reading from an English statement after doing so in Japanese.

"We will do everything in our power to regain the confidence of our customers," Toyoda said.

He said he planned to go to the U.S. soon to talk with American workers and dealers to bring the ranks together.

Analysts said fears of an even bigger consumer backlash prodded Toyota into recalling the Prius.

"If they hadn't done the recalls, their image would have suffered even more," said Ryoichi Saito, auto analyst at Mizuho Investors Securities in Tokyo.

The Japanese transport minister rapped Toyota as reacting too slowly, and said he was meeting U.S. Ambassador to Japan John Roos on Wednesday to exchange views about Toyota's recalls and make sure U.S.-Japan relations remained on good terms.

"The consideration for customers was lacking in Toyota," Seiji Maehara told reporters, after a meeting with Toyoda. "We hope this never happens again."

Toyoda, who visited the minister after his news conference, apologized and explained the recalls, Maehara said.

U.S. safety officials are investigating the brake problem.

It is suspected in four crashes resulting in two minor injuries, according to data gathered by the National Highway Traffic Safety Administration. Toyota says it's cooperating with NHTSA's investigation.

Also Tuesday, Toyota said it will voluntarily recall about 7,300 four-cylinder Camry sedans produced early in the 2010 model year because of a possible brake fluid leak. Dealers will inspect the cars for a power steering hose that could come in contact with a brake tube, causing a leak. The leak means it could take longer for the vehicle to stop, the company said. Owners will get letters starting in mid-February.

Problems with hybrid braking systems haven't been limited to Toyota.

Ford Motor Co. said last week it plans to fix 17,600 Mercury Milan and Ford Fusion gas-electric hybrids because of a software problem that can give drivers the impression that the brakes have failed. The automaker says the problem occurs in transition between two braking systems and at no time are drivers without brakes.

Toyota's plug-in hybrid is also being recalled in Japan, Europe and the U.S., but in small numbers because it is a largely experimental model for rental and government use.

The Prius holds a cherished spot in Toyota's vehicle lineup and is symbolic of its leadership in the "green" car market.

The Toyota executive overseeing quality, Shinichi Sasaki, said the delay that Prius drivers can feel when braking lasts for a fraction of a second as the antilock brakes kick in.

The problem happens only on snowy or bumpy surfaces, and the complaints did not become more numerous until winter, Sasaki said.

But Toyoda acknowledged the company could have done better in picking up on the complaints, managing the crisis and sending a message to car owners on a fix.

In the U.S., Toyota will add five more centers in addition to the current three that investigate customer complaints, Sasaki said.

"When compared to the size of Japan, America is so much bigger and so our network for gathering information was not enough," he said.

Toyota was one of the first companies to mass-market a hybrid that combines an electric motor with a gas engine, introducing the Prius in Japan in 1997. Its high gas mileage made it popular among environmentally conscious drivers, especially when gas prices spiked two years ago.

But the complexity of the Prius, a highly computerized car, has led to problems in the past. In 2005, the company repaired 75,000 of them to fix software glitches that caused the engine to stall. It has also had trouble with headlights going out.

Shares in Toyota rose 2.9 percent Tuesday to 3,375 yen, but are still down about 20 percent since Jan. 21, when it announced the gas pedal recall.

Greece readies tax change to fight crisis

Hopes that that Greece won't be allowed to default on its crushing debt load weighed against fears the country's crisis would spread through the 16-country euro zone, as the government worked Monday on a tax overhaul aimed at getting its deficit under control.

Finance Minister George Papaconstantinou says a new tax bill to be presented this week will expand the top 40 percent tax bracket to incomes below the current euro75,000 ($102,000) threshold.

In an interview in Ta Nea newspaper, Papaconstantinou also insisted that middle- and low-income earners would pay less tax. Papaconstantinou hopes to raise nearly euro4 billion in extra taxes this year, and an additional euro1.2 billion from a crackdown on tax evasion.

European stocks rebounded Monday, a sign that some think the government debt crisis that has shaken up European Union leaders may have been overdone. The reasoning is that a default would be such a serious blow to the euro currency that the EU would organize a rescue, although EU and Greek officials insist none will be necessary.

"A solution for Greece will be found, either from within the country or from the wider eurozone," said Daragh Maher, analyst at Calyon. "On a number of fronts the pessimism looks overdone, notably in relation to the performance of the global economy."

But the main Greek stock index was down more than 3.5 percent in midday trading, while Greek government bonds were trading around 350 basis points above the benchmark German issues of the same maturity, about the same as last week.

The Greek problems have wider significance because market fears could spread to other deficit plagued euro area countries such as Portugal, Spain, Ireland or Italy.

Greece's budget deficit reached 12.7 percent of annual economic output last year — four times over the EU limit — while the national debt was more than 113 percent of GDP. This alarmed Greece's European Union partners and international markets, forcing a spike in borrowing costs for Greece and other weak European economies and pushing down the euro exchange rate.

The Greek crisis highlights one of the vulnerabilities of the euro currency. It has one central bank — the European Central Bank — to set interest rates, but has no central fiscal authority.

Instead, the monetary union depends on all 16 governments following rules to keep their deficits within a limit of 3 percent of gross domestic product each year — and those limits have been breached during the world economic turbulence of the last three years.

EU officials have put intense pressure on Greece to get back within the limits. The government says it will do so by 2012, but markets remain skeptical that it can force through such extreme cuts, which could be highly unpopular.

While freezing public sector wages and cutting some bonuses, the government has fought shy of further salary cuts or layoffs in the civil service, which employs some 750,000 people — all who are guaranteed lifetime jobs.

European finance officials tried to reassure markets over the weekend with statements at the weekend meeting of finance officials from the Group of Seven leading industrialized countries in Iqaluit, Canada.

Speaking in Iqaluit Sunday, European Central Bank governor Jean-Claude Trichet offered renewed support for Greece's deficit-busting program, which he said the ECB would closely monitor.

"Now we expect and are confident that that the Greek government will take all the decisions that will permit it to reach that goal," he added.

British Treasury chief Alistair Darling said Greece's austerity plan was in the common European interest.

"The best reassurance that you can give to anyone is that countries individually do what they need to do to achieve their plans, but that we understand that collectively, it's in all our interests that countries return to good economic health as early as they potentially can."

One concern is whether governments in Greece and Portugal can push through unpopular austerity measures.

A newspaper poll Sunday found that most Greeks back Prime Minister George Papandreou's public sector spending cuts — which are expected to save close to euro2 billion ($2.74 billion). But the majority of respondents also opposed a hike in the fuel tax and the introduction of new taxes.

A first tangible indication of social reaction to the austerity plan will come on Wednesday, when civil servants, who face a salary freeze and bonus cuts, have called a nationwide strike. Greece's umbrella private sector union is planning a separate 24-hour walkout Feb. 24.

Further union anger is expected over a planned overhaul to Greece's profligate social security system, which will involve an increase in retirement ages and will be announced later this week.

Toyota to announce action soon for Prius hybrids

Toyota said Sunday that it will soon announce plans to deal with braking problems in its prized Prius hybrid amid reports it has decided to issue a recall for the vehicle in Japan, a possible new embarrassment for the world's biggest automaker.

Toyota Motor Corp. has already had to recall more than 7 million other cars in the U.S., Europe and China over a sticky accelerator and floor mats that can get caught in the gas pedal. Those problems and criticism of Toyota's response to them have sullied the stellar reputation for quality long enjoyed by one of Japan's corporate icons.

Separately, the company has told dealers in the United States it is preparing to repair the brakes on thousands of Prius vehicles there, according to an e-mail sent by a company executive. It was unclear whether Toyota planned a formal U.S. recall.

"We will make an announcement soon on the action we plan to take," spokeswoman Ririko Takeuchi said, commenting on media reports Sunday that the company has decided to issue a Japan recall. Takeuchi did not confirm those reports.

The Prius is the world's top-selling gas-electric hybrid and its fuel efficiency has drawn intense interest amid concerns about global warming and dependence on fossil fuels.

Toyota decided Saturday on a recall in Japan covering its latest Prius model and has notified domestic dealers, Japan's largest newspaper, the Yomiuri, reported without naming sources. It said Toyota would announce the move early in the coming week after consulting with the Japanese government. Japan's Kyodo News agency and TV Asahi carried similar reports. Kyodo said Toyota had started notifying dealers and that at least 170,000 vehicles in Japan would be subject to the recall.

Phone calls to the section at Japan's transport ministry dealing with recalls went unanswered Sunday. None of about 10 Toyota dealers in Tokyo and the western Japanese city of Osaka said they had received any notification. Three dealers in the U.S. said the same thing on Sunday.

Prius drivers in Japan and the U.S. have complained of a short delay before the antilock brakes kick in — a flaw Toyota says can be fixed with a software programming change. The brakes will work if the driver keeps pushing the pedal.

The brake problem affects about 270,000 Priuses that were sold in the U.S. and Japan starting last May. The company says it has already fixed vehicles that went on sale since last month.

Bob Carter, a Toyota group vice president, sent an e-mail message Friday night to U.S. dealers saying the automaker is working on a Prius repair plan and will disclose more details early this week. At least 100 drivers of Prius cars in the U.S. have complained to the government that their brakes seemed to fail momentarily when they were driving on bumpy roads. The government says the problem is suspected in four crashes and two minor injuries.

Public awareness of the problem "has prompted considerable customer concern, speculation, and media attention due to the significance of the Prius image," Carter said in the e-mail. "We want to assure our dealers that we are moving rapidly to provide a solution for your existing customers."

Toyota on Sunday morning began airing spots on U.S. television saying that the company is "working around the clock" to build the highest-quality vehicles and to restore the faith of its customers.

"In recent days, our company hasn't been living up to the standards that you've come to expect from us," an unidentified announcer said in a voiceover.

Carter wrote that the ads tell viewers of Toyota's 50-plus years of building safe, reliable vehicles in the U.S. They were airing in prime time and on local, national and cable news shows, but will not appear during the Super Bowl, he wrote.

Toyota's response to the safety issues has drawn the attention of U.S. politicians. Toyota Motor North America Chairman and CEO Yoshi Inaba will appear before the House Committee on Oversight and Government Reform on Wednesday, as will Transportation Secretary Ray LaHood and National Highway Traffic Safety Administration Administrator David Strickland, the committee chairman announced Sunday.

"There appears to be growing public concern regarding which Toyota vehicles may be problematic and how people should respond," Chairman Edolphus Towns(D-NY)said in a statement. "Consumers want to know whether their cars are safe to drive and, if not, they need to know what to do about it."

A key committee member has asked that transportation officials who served under former President George W. Bush also appear.

Besides a full-fledged safety recall, the company could simply ask owners to bring in their vehicles for repairs, since the brakes are not failing completely. The Yomiuri newspaper, however, said that Toyota decided on the more serious step of a recall for the Prius to give priority to restoring consumer trust.

Toyota has acknowledged receiving dozens of complaints about the Prius in Japan, where there is high-level government concern about Toyota's quality problems. Cabinet ministers have expressed alarm and urged the company to move more quickly to ease consumer worries.

Media criticism of Toyota has intensified since a news conference on Friday by Toyota President Akio Toyoda in which he offered an apology for the defects, but few details about what the automaker would do about the Prius.

The reports said the new Prius model was released in May, and more than 300,000 have been sold in about 60 countries and territories.

Toyota plans to resume production Monday at U.S. factories that make the eight models recalled for sticky gas pedal systems, spokesman Brian Lyons said in an e-mail Sunday. The production halt involved the RAV4 crossover, Corolla, Matrix hatchback, Avalon, Camry, Highlander crossover, Tundra pickup and the 2008-10 Sequoia SUV.

German tax cheat gets $10 million in damages from bank

A court has ordered a former subsidiary of Liechtenstein's LGT bank to pay over euro7.3 million ($10 million) to a client for failing to inform him that his confidential details had been stolen and handed to authorities, thereby harming his chances of escaping criminal penalties for tax evasion.

Fiduco Treuhand AG, previously known as LGT Treuhand AG, said Monday it would appeal against the decision by the principality's district court ordering it to pay Elmar Schulte compensation for a fine of the same size that he was given in place of prison time by a German court after being found guilty of tax evasion.

Schulte was among hundreds of German citizens exposed as tax cheats when German authorities obtained a CD-ROM containing the names of LGT Treuhand clients more than two years ago.

He was convicted of tax evasion in 2008 by a German court.

The ruling was keenly anticipated as several other former clients of Fiduco Treuhand are reportedly considering suing the company for failing to inform them early enough that they risked being exposed. Under German law, a person who files an amended tax return before being investigated by tax authorities can escape more severe penalties — such as a prison sentence.

A spokesman for LGT, which will pay the fine on behalf of Fiduco Treuhand if the ruling isn't overturned, said the bank doesn't expect a wave of lawsuits.

"We view this as an exceptional case," said Christof Buri of LGT.

The court rejected three other claims by Schulte that he had received bad counsel by Fiduco.

Russia picks 4 banks to manage its debt issue

Russia's finance ministry announced Friday its pick of four investment banks to manage its upcoming sovereign eurobond issue, which could raise up to $17.8 billion and will mark the country's return to the debt market after ten years of surpluses.

Barclays Capital, Citibank, Credit Suisse and VTB Capital have been selected to jointly organize Russia's eurobond issue, the ministry said in a statement. Deputy Finance Minister Dmitry Pankin was quoted by the state-run news agency RIA Novosti as saying that other banks could be tapped to arrange the next issue.

Russia announced last year that it would have to borrow in capital markets to cover its budget deficit — which may reach 6.8 percent of the GDP this year. Moscow last placed bonds in 1998 and did not return to the debt market after a sovereign debt default the same year.

The Finance Ministry on Friday said there has been no final decision yet on when and how much money to place, but Finance Minister Alexei Kudrin said last week that the first tranche of the issue could be sold in the first half of the year.

Russia's 2010 budget mentions a possibility of borrowing up to $17.8 billion, but Pankin has recently said Russia would borrow far less than that as its economy is recovering faster than expected.

Russia paid off most of its massive Soviet-era debt to the Paris Club and the London Club by 2006. Last week, it paid a symbolic $1 million to the London Club to settle that debt.

Two rating agencies, Fitch and S&P, raised the outlook for Russia's sovereign debt within the past two months. Kudrin lauded those steps, saying that this would make Russian borrowing significantly cheaper.

While Russia clearly needs far less money that its previously expected, market analysts said borrowing would be wise, since this would allow the government to keep its $60 billion rainy-day fund intact in case oil prices drop.

Although Russia's gross domestic product declined by 7.9 percent last year, Russia's economy has been on a rise since the third quarter — fuelled by growing oil and gas prices. The budget deficit came to 5.9 percent of GDP in 2009 — several percentage points better than orginally planned.

January unemployment rate drops to 9.7 percent

The unemployment rate dropped unexpectedly in January to 9.7 percent from 10 percent while employers shed 20,000 jobs, the government said Friday.

The rate dropped because a survey of households found the number of employed Americans rose by 541,000, the Labor Department said. The job losses are calculated from a separate survey of employers.

The report also included an annual revision to the estimates of total payrolls, which showed there were 930,000 fewer jobs last March than previously estimated. The department also revised down its estimates for April through October of last year, adding another 433,000 job losses.

The November figure was revised higher, however, to show a gain of 64,000 jobs.

All told, the Great Recession has eliminated 8.4 million jobs, the department said. That's the most of any recession since World War II as a proportion of total payrolls.

Aside from November's gain, January's job losses were the smallest since the recession began. Employers cut 779,000 jobs in January 2009.

The report included more good news from the manufacturing sector, which is a key factor in the recovery. Manufacturers gained 11,000 jobs, its largest increase since April 2006.

Retailers added 42,100 jobs, the most since November 2007, before the recession began. Temporary help services gained 52,000 jobs, the fourth month of gains in that category. That could signal future hiring, as employers usually hire temp workers before permanent ones.

The number of part-time workers who want full-time work, but can't find it fell by almost 1 million. That lowered the "underemployment" rate, which also includes discouraged workers, to 16.5 percent from 17.3 percent.

Toyota hit by over 100 Prius brake complaints

Toyota Motor Corp. has been hit by over 100 complaints in the U.S. and Japan about brake problems with the popular Prius hybrid, the latest in a spate of quality troubles for the automaker as it grapples with massive global recalls.

The Japanese company's sales are being battered in the U.S. — Toyota's biggest market — after recalls of top-selling models to fix a gas pedal that can stick in the depressed position.

The new Prius gas-electric hybrid, which went on sale in Japan and the U.S. in May 2009, is not part of the recalls that extend to Europe and China, covering nearly 4.5 million vehicles.

The U.S. National Highway Traffic Safety Administration has received about 100 complaints involving the brakes of the Prius new model. Two involved crashes resulting in injuries.

Japan's transport ministry said Wednesday it has also received 14 complaints since July last year about brake problems with Toyota's new Prius hybrid.

The 14 complaints included an accident in July 2009, in which a Prius crashed head on into another car at an intersection. Transport ministry official Masaya Ota said two people were slightly injured in the accident.

"The Prius driver in the accident told police that a brake did not work," Ota said. "Other Prius drivers also complained brakes were not so sharp." The complaints in Japan involve the new Prius model, and the vehicles were all made in Japan, he said.

The ministry ordered Toyota, the world's No. 1 automaker, to investigate the complaints. The other 13 cases happened from December to January 2010. Ota said the ministry has yet to receive a formal report on the complaints from Toyota.

Toyota spokeswoman Ririko Takeuchi said the company has received reports about the Prius complaints in North America and in Japan and was now looking into the matter.

Toyota shares plunged 5.7 percent to 3,400 yen ($38) with jittery investors dumping stocks in the wake of the Prius woes in the U.S. and Japan. The benchmark Nikkei stock index edged up just 0.3 percent to 10,404.33 as the drop in Toyota dampened sentiment.

"Investors were worried the latest trouble involving the Prius could get bigger. The problem could pose a bigger question on Toyota's quality and safety," said Kazuhiro Takahashi, market analyst at Daiwa Securities SMBC Co. Ltd.

The Japanese automaker is facing growing criticism that it has not done enough to ensure the safety of its vehicles.

U.S. Transportation Secretary Ray LaHood told The Associated Press Tuesday that federal officials had to alert Toyota to the seriousness of the safety issues that eventually led to the recalls.

"They should have taken it seriously from the very beginning when we first started discussing it with them," he said. "Maybe they were a little safety deaf."

LaHood also said the U.S. government was considering civil penalties for Toyota for having dragged its feet on safety concerns.

Toyota executive vice president Shinichi Sasaki acknowledged Tuesday in a Nagoya, Japan, news conference that it took prodding from NHTSA officials for the company to decide on the U.S. recall.

Toyota has long prided itself on sterling vehicle quality and assembly line methods that empowered workers to ensure faultless production.

The latest recall, announced Jan. 21, over sticky gas pedals affects 2.3 million vehicles in the U.S. alone.

Any serious problems emerging in the Prius, Toyota's flagship green car model, is certain to further tarnish its brand.

The Prius, now in its third generation since its 1997 introduction, is the best-selling gas-electric hybrid in the world, racking up a cumulative 1.6 million units sold so far, according to Toyota.

Hybrids, by going back and forth between a gasoline engine and electric motor, tend to offer better mileage in slow-speed and stop-and-go driving that's common in crowded cities.

7 Saving Tips

Humans are programmed for self-preservation. Ironically, that doesn't mean we're instinctively inclined toward wealth preservation.

Sure, some people are inveterate savers -- reveling in their ability to ignore consumerism and sock away 30% of their gross income. But then there are the rest of us, who manage to sock away just 4% of our income, according to recent savings rate figures.

We all know better. We might even think, right as we open our wallets, "I really should max out my IRA before I buy this dress/tool/Clapper, but I ... can't ... stop ..."

If consumption control is a problem for you, or you just haven't developed the habit of saving, here are some tricks you can use to increase your net worth.

Trick No. 1: Hide it before you can spend it.
Out of sight is out of mind. When it comes to money, out of sight means in the bank -- and in sight eventually means out of the wallet.

So, put your money out of reach before you can spend it. This can easily be accomplished by signing up for your retirement plan at work. The money is deducted from your paycheck and sent straight to your 401(k), 403(b), or 457, before income taxes are taken out. So, not only are you increasing your savings, but you're also reducing your taxes. If your boss matches contributions, then you're really losing money by not participating.

There are many other ways to hide your money from your inner spendthrift. Sign up for an automatic investment program, and money can be electronically transferred from your checking account to your IRA, a savings account, a dividend reinvestment plan (Drip), or a mutual fund that invests in money markets, bonds, stocks, precious metals, or real estate investment trusts.

A few years back, economics professors Richard Thaler and Shlomo Benartzi came up with a twist on this "pay yourself first" strategy. Their "Save More Tomorrow" plan called for people to increase their savings rate with every raise. So, if you're contributing 3% of your salary to your 401(k) this year, you'd then up your contribution to 6% when you receive your next raise. In a few years, you'll contribute the maximum allowed.

Trick No. 2: Limit your spending power.
Automated teller machines (ATMs) make getting cash very easy -- which is very bad for your bottom line. Just take a look at your bank statements. See all those $40, $60, and $100 ATM withdrawals listed? Can you account for that cash? Probably not.

So, institute this rule: Decide on a minimum amount of cash you need for a week. Withdraw that amount on Monday, and do not make another withdrawal until the following week. If something important comes up, use your credit card. But knowing that you have a limited amount to spend over the course of the week will make you think twice before buying some random item that will temporarily sate your desire to consume. And anything that discourages spending is a boon to saving.

Trick No. 3: Pay medical and day-care expenses up front, and tax-free.
Medical and dependent-care flexible spending accounts (FSAs) permit you to have a certain amount of money taken out of your paycheck -- before Uncle Sam can take his cut -- for qualified expenses. The tax savings can be huge, especially for families who spend thousands every year on day care.

Just as with a 401(k), people in the 25% tax bracket will cut their tax bills by $250 for every $1,000 contributed to an FSA. But unlike retirement accounts, FSAs are also exempt from Social Security taxes, which results in an additional $76.50 in tax savings per $1,000 contributed.

You do have to use all the money in your FSA by the end of the year, or you lose the money forever. So, be conservative when determining the contribution amount. But this is an easy way to save hundreds on taxes by paying for services and items that you would've had to pay for anyway.

And here's where the real savings trickery comes in. When you get that reimbursement check in the mail, don't go running off to Mohair Sofas 'R' Us. Deposit it in one of your many savings vehicles.

Trick No. 4: Pay debts forever -- but become the payee.
Many of us have some kind of monthly loan payment, whether it be a school loan, a car loan, credit card debt, a mortgage, or all of the above. The day will come when you send in your final payment. But unless that debt has been debilitating, you've been doing fine while making those monthly payments.

So, keep it up. Except, instead of sending a check to the lender, send the check to a savings, brokerage, or mutual fund account. You've increased your net worth by paying off the debt; now keep up the good work by building up your assets.

Trick No. 5: Paper the piggy bank.
You've probably heard of the old "save your change" strategy: Pay for everything with paper money, and put the change in a big jar. Once the jar is full, rent The Sound of Music, plant yourself in front of the TV, roll all your coins, and deposit them in your savings account.

This is a fine plan, but why not supersize it? At the end of the day, deposit all your change and your dollar bills. Maybe even throw in a fiver every once in a while. For years, you've been grabbing lattes and happy meals, not thinking twice about dropping a few bucks for something that'll add little more to your life than a rounder torso. "Hey, it's only three or four dollars," we say to ourselves.

Why not turn it around and say the same thing every day, as we empty our pockets? "It's only a few dollars," you'd say as you deposit $3-$5 every day in your piggy bank, which will accumulate to well over $1,000 if you keep it up for a year.

If your preferred savings account isn't with your local bank, immediately write a check for the same amount of all your loose change, and send it to your retirement/college/emergency account after you've rolled the coins, counted the bills, and deposited the money at the bank.

Trick No. 6: Break windfall.
Every once in a while, a chunk of change falls in our laps. It can come from all kinds of places: a bonus, a tax refund, yard-sale proceeds, savings from mortgage refinancing, successful lawsuits against movie studios for making so many mediocre movies despite its wealth of resources.

Oh, the excitement of found money! All the possibilities! We're not suggesting that you deny yourself a little indulgence -- a financial plan based solely on self-denial is doomed to fail. But here's a way to satisfy both the spender and saver in you: From now on, break up every windfall into chunks. Use some for long-term goals, some for short-term goals, and some for immediate mad money.

Trick No. 7: Satisfy your spending lust.
Many of the reasons we choose to spend instead of save are based on emotion. We're bored, depressed, or upset that it's still five months until football season. When you feel the urge to spend your way to happiness, do things that will satisfy your desire for the new, the novel, the untasted, and the not-yet worn. Come up with a list of inexpensive things you can do instead of seeking mall therapy.

You know what they are: video, book, CD, and clothes exchanges with friends; dinner in a pillow fort in your living room; trips to the museum; camping; picnics -- whatever you enjoy. Stick the list in your wallet and pull it out every time you have the urge to spend money that you'd be better off saving.

Stocks gain as pending home sales edge higher

Better news from the housing industry sent stocks higher Tuesday, including an increase in the number of people with contracts to buy homes.

The National Association of Realtors, a trade group, said its index of sale contracts rose 1 percent in December. It was the ninth improvement over the past 10 months as buyers scrambled to take advantage of a first-time homebuyer tax credit before it was set to expire last November.

"It's a slow, sustainable growth," said Daniel Penrod, senior industry analyst for the California Credit Union League. "Most people would prefer a quick rebound but that's not likely to happen."

The home sales report was the latest bit of encouraging news on the economy. Stocks rose on Monday after a surprisingly strong reading on the manufacturing sector, and on Friday the government reported that the U.S. economy grew at an annual rate of 5.7 percent in the final three months of 2009, a faster pace than expected.

Homebuilder stocks rose sharply after D.R. Horton Inc. posted its first profit since 2007 during its fiscal first quarter. Much of its $192 million profit during the October-December period came from a tax gain, but its revenue rose because of a 36 percent jump in home sales. Orders increased 45 percent.

The reports brought a positive tone to the market, which stumbled in late January as concerns arose that the recovery might be stalling and that the market's 10-month advance was running out of gas. The Standard & Poor's 500 index fell 3.7 percent in January, its worst month since hitting a 12-year low nearly a year ago.

In midday trading, the Dow Jones industrial average rose 67.33, or 0.7 percent, to 10,252.86. The Standard & Poor's 500 index rose 8.36, or 0.8 percent, to 1,097.54, while Nasdaq composite index rose 8.76, or 0.4 percent, to 2,179.96.

Bond prices inched higher. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.65 percent from 3.66 percent late Monday.

Investors are turning their attention to a series of economic reports this week to see if the growth of late last year has a good chance of continuing. The most important indicator will come on Friday when the Labor Department releases its January employment report.

Among home builders, D.R. Horton jumped $1.14 cents, or 9.6 percent, to $13.05 after posting a profit for the first time since 2007. Toll Brothers Inc. rose 57 cents, or 3.1 percent, to $19.19, while Pulte Homes Inc. rose 58 cents, or 5.5 percent, to $11.14.

Ann Taylor Stores Corp. rose $2.04, or 15.2 percent, to $15.43 after saying its fourth-quarter earnings would top expectations on stronger sales and profit margins.

Lexmark International Inc. said lower costs helped increase its fourth-quarter earnings. The printer and copier maker rose $2.33, or 8.7 percent, to $29.13.

Crude oil rose $1.30 to $75.73 per barrel on the New York Mercantile Exchange.

More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 432 million shares compared with 393.6 million shares traded at the same point Monday.

The Russell 2000 index of smaller companies rose 2.53, or 0.4 percent, to 611.78.

In afternoon trading, Britain's FTSE 100 rose 0.7 percent, Germany's DAX index gained 1 percent, and France's CAC-40 rose 1.3 percent. Earlier, Japan's Nikkei stock average rose 1.6 percent.

Barack Obama pitches aid for struggling small businesses

President Barack Obama's bid to sell his economic agenda and re-energize voters picks up in politically significant New Hampshire, where he will again promote an idea to free up money for small businesses that are hurting.

Obama travels to Nashua, N.H., on Tuesday to draw attention to a proposal highlighted in his State of the Union address last week: funneling $30 billion to local banks so they can lend small businesses money they need to grow their enterprises and create jobs.

The president also will tour a local business and hold his second town hall in six days, a format that allows him to show engagement with the public and counter a sense of "remoteness," as he has put it, that people have had with his policy agenda.

"Jobs will be our No. 1 focus in 2010," Obama said in excerpts of his prepared remarks, which the White House released early. "And we're going to start where most new jobs do — with small businesses. These are companies that begin in basements and garages when an entrepreneur takes a chance on his dream, or a worker decides it's time she became her own boss."

The $30 billion in loan financing would come from money repaid by big banks that got help from the $700 billion Troubled Asset Relief Program, the vastly unpopular bailout for those on Wall Street whose actions led to the economic downturn.

That $30 billion would be used to create the Small Business Lending Fund, separate and distinct from TARP, according to two senior administration officials who outlined the program on condition of anonymity before Obama's announcement.

The fund would be open to banks with assets of $10 billion or less. About 8,000 such small and community banks would be eligible.

Obama also was calling on Congress to pass legislation creating the new fund, one of several ideas he has promoted recently to help small businesses. He has called for tax credits for those small businesses that hire new workers or raise wages, and for eliminating all capital gains taxes on small-business investment. He also has proposed tax incentives for all businesses to invest in new plants and equipment.

White House officials said the new fund will bolster banks' balance sheets and enable them to make more loans to small businesses.

But many in the banking industry say lending is not hampered by a lack of capital. Even well-capitalized banks are having trouble finding creditworthy borrowers. Small businesses also are reluctant to borrow money in a sluggish economy for expansion or improvements.

The White House officials argued that banks capital reserves are one of several factors limiting credit. They said it will become more important as the economy improves.

The proposed new lending program is a refined version of a plan the administration first announced in October.

But the administration ran into resistance from bankers who believed they would be stigmatized if they accepted TARP funds. The Treasury Department has worked since then to try to make the program acceptable and to remove some of the requirements that applied to banks that accepted TARP money during the financial crisis.

Obama's trip to New Hampshire comes two weeks after Democrats suffered the stunning loss of a Senate seat in neighboring Massachusetts.

The president is working to shore up his party's standing heading into the November midterm elections to avoid heavy losses in the House and the Senate, both of which are under Democratic control and feeling more pressure as millions of people cannot find jobs.

Fixing the economy is the nation's top worry and the centerpiece of Obama's efforts. The degree to which he is successful will play out in states like New Hampshire, where two House seats and a Senate seat are in play in November.

Obama the New Hampshire presidential primary in 2008 to Hillary Rodham Clinton, now his secretary of state, but won the state comfortably in the general election over Republican Sen. John McCain of Arizona.

Obama last ventured to New Hampshire in August — the town hall that time was in Portsmouth — to promote health care legislation at a time when tempers were hot in places around the country. He found a friendly audience that day, although the health care reform effort itself has recently become far less certain.

Toyota pedal fix too late to prevent backlash

Toyota's fix for the gas pedal problem that led to the recall of millions of cars has not come soon enough to prevent a consumer backlash in the U.S. and elsewhere that is battering its sales.

One of the automaker's top executives on Tuesday said the damage from the global recall of nearly 4.6 million vehicles may be greater than previous quality problems because of the massive scale.

"This is unprecedented in having caused this huge problem for customers," said Shinichi Sasaki, who oversees quality control at the world's No. 1 automaker.

He said it was too soon to put a number on the ultimate cost of the recall. But Tatsuo Yoshida, an auto analyst at UBS in Tokyo, estimated the recalls are likely to cost about $900 million, and lost sales are already costing Toyota another $155 million a week.

The recall to fix a gas pedal that can stick when depressed covers some 2.3 million vehicles in the United States alone, including some of Toyota's best-selling models, such as the Camry and Corolla. The company has recalled millions more because of floor mats that can catch the gas pedal.

Toyota apologized to its customers Monday and said a piece of steel about the size of a postage stamp will fix the gas pedal problem. Repairs will take about a half-hour and will start in a matter of days, the company said.

The repair involves installing a steel shim a couple of millimeters thick in the pedal assembly, behind the top of the gas pedal, to eliminate the excess friction between two pieces of the accelerator mechanism. In rare cases, Toyota says, that friction can cause the pedal to become stuck in the depressed position.

Toyota insisted the solution, rolled out six days after it temporarily stopped selling some of its top models, has been through rigorous testing and will solve the problem for the life of the car.

After a week in which Toyota drivers said they were worried about the safety of their cars and dealers were frustrated by a lack of information, Toyota said it would work to regain the trust of its customers.

"This is embarrassing for us to have ... this kind of recall situation," Jim Lentz, president of Toyota Motor Sales USA, told reporters. "But it doesn't necessarily mean that we have lost our edge on quality. But we do have to be vigilant. We have to redouble our efforts to make sure this doesn't happen again."

Earl Stewart, who owns a Toyota dealership in North Palm Beach, Fla., and had been critical of delays in getting repair parts to dealers, said he was happy with the fix. He said he was reassured that it had been tested by independent engineers, not just Toyota's.

"You never say you're absolutely sure about anything, but I feel that this is probably the answer," he said.

The National Highway Traffic Safety Administration said it had "no reason to challenge this remedy." Transportation Secretary Ray LaHood said last week the government had urged Toyota to issue the recall and suspend production.

Others, meanwhile, say consumers are still likely to be smarting.

Toshirou Yoshinaga, analyst at Aizawa Securities in Tokyo, said Toyota failed to move quickly enough.

"The top management should have gone public sooner to address the American public," he said. "The trust in Japanese quality, in Toyota, has been shaken."

Masaaki Sato, who has written books on Japanese automakers, including Toyota, said the biggest mistake was not having President Akio Toyoda immediately give an explanation and squelch fears among owners.

Toyoda largely ignored media requests for comment on the recalls. He gave an apology to customers when approached by Japanese broadcaster NHK last week while he was in Davos, Switzerland, for a conference.

According to numbers Toyota released Tuesday, the recall covered 4.45 million cars worldwide - 2.48 million of them in North America, 1.71 million in Europe, some 80,000 in China and 180,000 in other regions, including the Middle East.

It estimated repairing all the recalled cars would take months. It said some dealers were planning to stay open around the clock to make the repairs once parts arrived. Parts were expected to begin arriving late Tuesday and Wednesday.

Toyota's European operations said the parts needed to fix the gas pedal problem will start arriving in Europe next week.

Besides millions of dollars a day in lost sales, the recall posed a public-relations challenge to Toyota, which for decades has enjoyed a loyal customer base and a reputation for quality.

Toyota took out full-page newspaper ads declaring the episode a pause "to put you first," and on Monday it sent Lentz to morning news shows to express confidence in the fix.

That was not enough for Michelle Lynch, of Safety Harbor, Fla., who is afraid to drive her 2006 Toyota Avalon after she says her accelerator stuck while she was driving to work on Jan. 25.

Lynch claims the accelerator stuck for about 45 seconds. She says she quickly put the car into neutral and pressed the brakes, regaining control of the vehicle, but she now is concerned the engine may have been damaged.

"Ultimately, I would like to have it fixed and make sure it's fixed right," Lynch said Monday, adding that Toyota has provided "different excuses for what the problem was so it's hard for me to believe that just a simple fix is going to be adequate."

Speaking to reporters at Toyota's Nagoya office, executive vice president Sasaki defended his company's perceived dallying in explaining to consumers, and said it came from Toyota focusing on trying to fix the problem.

Generally after a recall, sales drop about 20 percent in the first month and then gradually recover, said Sasaki. But he acknowledged the latest recalls were unprecedented in scope.

He denied there were any electronic problems in the vehicles being recalled in the U.S., as some have speculated. Toyota investigated and had "not found a single case," he said.

NHTSA was looking into the possibility of such problems, said a Transportation Department official. The official, who spoke on condition of anonymity to discuss an ongoing investigation, said electromagnetic interference might cause the throttle control systems in the Toyota vehicles to malfunction, but NHTSA had not seen evidence to support that yet.

The company plans to restart U.S. production Feb. 8 on models covered by the recall — the Camry, Corolla, Avalon and Highlander cars, the Matrix hatchback, the Tundra pickup, the RAV4 crossover and the Sequoia SUV. The production was suspended starting Monday.

Toyota shareholders appeared pleased. The company's stock, which took a hit last week, was up 4.5 percent Tuesday in Tokyo. The broader market was up 1.6 percent.

Top business and economy news blog

Travel

Others