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American Express Co said credit card spending increased in October from September in another sign that the worst of the financial crisis may have passed for the largest U.S. credit-card company, sending its shares up 1.5 percent to a 14-month high.

American Express card spending, adjusted for foreign exchange factors, was down just 1 percent in October compared with a year earlier, Chief Executive Kenneth Chenault said on Tuesday.

That showed improvement from a decline of a bit more than 5 percent in September and almost 10 percent in August.

“The trends in spending are encouraging, and there are signs that the recession may be approaching an end,” Chenault said at a financial services conference organized by Bank of America Merrill Lynch.

Spending volume rose in October to the highest level since last December. “We view this performance as positive,” Chenault said.

Chief Financial Officer Dan Henry in October said spending volumes had been stable since May and forecast spending could decline in the low single digits or be flat in the fourth quarter compared with a year earlier.

Total card spending fell 11 percent in the third quarter from a year earlier but showed an improvement against a 16 percent contraction in the second quarter low fee payday loans.

American Express was the fastest growing credit card company between 2003 and 2007 as it relaxed lending standards. But it paid a heavy price in the financial meltdown, and bad loans rose to record highs.

The company cut 11,000 jobs and reduced spending to save $2.5 billion, part of which it will invest now to grow. It also converted itself into a bank holding company to get access to government bailout funds, which it has repaid.

Analysts have said American Express, which relies on affluent and corporate customers more than its peers, is recovering faster from the recession as economic jitters ease.

American Express shares were up 59 cents, or 1.5 percent, to $39.64 in afternoon trading on the New York Stock Exchange, a 14-month high. The shares have more than doubled in price this year.

(Reporting by Juan Lagorio, Editing by Gerald E. McCormick and John Wallace)

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Thomson Reuters Corp’s quarterly revenue fell but profit beat Wall Street estimates, helped by foreign currency rates and cost cuts, and the company affirmed its 2009 outlook.

The news and financial data publisher reported on Thursday that revenue in its markets division, which serves the financial industry, fell 4 percent to $1.86 billion in the third quarter.

Revenue from ongoing businesses, excluding the impact of foreign exchange rates, fell 2 percent to $3.21 billion. That compared to the average analyst forecast of $3.23 billion.

“Financial firms are watching costs and being very careful on spending money, so a lot of discretionary expenses regarding services are being cut back,” said Benchmark Co analyst Edward Atorino.

The company, formed last year by the merger of Thomson Corp and Reuters Group Plc, said underlying operating profit rose 3 percent to $711 million, from $690 million a year earlier.

Adjusted earnings per share fell to 43 cents from 47 cents, due to higher integration spending, but this beat the average analyst forecast of 40 cents per share, according to Thomson Reuters I/B/E/S.

“While the weak year-to-date net sales experienced in recent quarters are now flowing through into revenues, we expect this dip to be shallow and limited to the next few quarters,” Chief Executive Thomas Glocer said in a statement.

He also said, “Our Tax and Accounting and Healthcare and Science businesses continued to perform very strongly, and sales of subscription products in our Markets and Legal units improved in Q3 over what we expect were their bottom in Q2 advanced payday loan.”

Thomson Reuters affirmed its previous guidance, saying it expects revenue to grow in 2009 and underlying operating profit margin and free cash flow to be comparable to 2008.

The company expected the impact of weaker subscription sales in its markets and legal businesses in 2009 to continue to drag on revenue in the first half of 2010. But it said growth in other units, a focus on costs and benefits of the merger are expected to reduce the impact on operating profit.

PROFIT MARGIN UP

Thomson Reuters expects at least $1 billion in annual savings by the end of the year.

Underlying operating profit margin rose to 22.1 percent in the third quarter from 20.7 percent a year earlier.

In the professional division, which includes products for lawyers, accountants and healthcare professionals, revenue rose 2 percent before currency adjustments to $1.36 billion. Higher sales in tax and accounting, and healthcare and sciences offset a 1 percent decline in legal business revenue.

In the markets division, revenue from the media unit fell 10 percent before currency adjustments, amid consolidation among traditional media outlets such as newspapers. 

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Credit rating agencies would be more tightly regulated and more exposed to lawsuits under legislation approved on Wednesday by the U.S. House of Representatives Financial Services Committee.

In another procedural step forward for the Obama administration’s and congressional Democrats’ push for financial reform, the committee voted 49-14 to send the bill to the full House for a vote, likely next month.

Credit rating agencies are widely blamed for failing to spot credit market problems, with securitized debt and other instruments, in the run-up to last year’s financial crisis.

President Barack Obama and Democrats have been working for months on a package of proposals to tighten bank and capital market regulation after the crisis, the worst in decades.

“The rating agencies really screwed up and now people are asking for us to put their heads in the guillotine … But what really needs to happen is to see what can be done to make sure this doesn’t happen again,” said Representative Paul Kanjorski, author of the committee’s bill.

The agencies are viewed by critics as compromised by their prevailing business model, in which issuers of debt pay the agencies for debt ratings. Kanjorski said lawmakers explored ways to change that model, but found it was impractical no fax payday advances.

Instead, the bill imposes regulations on the industry intended to “close many of the weaknesses and the loopholes,” said Kanjorski, a Democrat.

Firms affected by the bill include Moody’s Corp, Standard & Poor’s and Fitch Ratings.

The bill would for the first time set up an office in the U.S. Securities and Exchange Commission to oversee the agencies and their ratings and how they are determined.

It would also open the door to more lawsuits by investors against agencies over flawed ratings, a provision opposed by the agencies and likely to attract controversy as the bill works its way to the House floor and the Senate.

The bill also calls for removing some references in federal law that mandate certified agencies’ credit ratings as a way to reduce the pervasiveness of their use.

The committee, chaired by Democratic Representative Barney Frank, was expected to vote later on a bill to beef up the SEC’s budget and legal protection standards for investors.

(Editing by Dan Grebler)

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Former Bear Stearns hedge fund manager Matthew Tannin, on trial for fraud and lying to investors early in the financial crisis, might have made strategic mistakes but he did not conspire with colleagues to commit a crime, his lawyer said on Thursday.

A New York jury also heard testimony from a wealthy investor who said he would have pulled money from a Bear Stearns Asset Management fund had he known Tannin’s boss and co-defendant, Ralph Cioffi, transferred $2 million of his own money to another fund.

Cioffi, 53, and Tannin, 48, have denied charges of fraud and conspiracy in a June 2008 indictment that made them the first high-profile Wall Streeters to face criminal charges stemming from problems with subprime mortgages and overall market liquidity.

Cioffi is also accused of insider trading over the transfer, a charge his lawyer described as “ridiculous” in his opening statement on Wednesday. He said Cioffi was not required to give notice to investors over decisions about his personal investments in the funds he managed.

“I would have pulled my money out. Why? If he didn’t have faith in what he was doing, why should I?” Howard Brown, chief executive officer of Rentacrate LLC, said under questioning by U.S. prosecutor James McGovern.

Brown, the first witness called by the government, said he lost a little more than $3 million. He first invested with one of Cioffi’s funds in mid-2006. Statements from the fund did not show a negative month until a drop of 6 percent in May 2007, which he told the court was “quite a shocker.”

Cioffi and Tannin managed two hedge funds that collapsed in mid-2007, costing investors — some of them large banks — between $1.4 billion to $1.6 billion. The funds were crammed with collateralized debt obligations (CDOs), securities backed by pools of debt that included subprime mortgage-backed securities.

Neither man is charged with contributing to the demise of Bear Stearns Cos not long after the funds collapsed. The company was sold to JPMorgan Chase & Co in a government-backed deal.

FEARS IN EMAILS

Emails written by Cioffi and Tannin are key to the government’s charges that they intended to deceive investors at an early stage in the subprime market meltdown.

“No one can lie about what the future will bring because nobody knows what the future will bring,” Tannin’s lead lawyer, Susan Brune, told the jury in her opening statement on Thursday in U.S. District Court in Brooklyn.

“He tried to foster debate, think through all the options and he used emails to foster that kind of debate,” Brune said.

Prosecutors contend that by March 2007 — more than 18 months before the full extent of the global financial crisis became clear — the pair promoted the funds to investors while privately emailing their fears about a possible market calamity.

Brune addressed a lengthy April 22, 2007, email by Tannin to Cioffi and another colleague, one paragraph of which was highlighted in the indictment. Tannin presents two extreme positions: either closing the funds or aggressive investment following an internal company report on CDOs.

He wrote that if the report was at all accurate “then the subprime market is toast” and the funds should be closed. 

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U.S. holiday sales in 2009 will likely be almost flat with the anemic showing of a year ago, a new survey predicted, following in a line of cautious early forecasts for the period.

Overall sales in the holiday shopping season will likely rise only 0.03 percent this year to over $90 billion, according to a survey by data and media firm Nielsen Co.

On the basis of sales by the number of items sold, sales would be flat to down 0.11 percent in the period, the survey showed.

Holiday sales, usually measured in the November-December shopping period, can ring up anywhere between 25 and 40 percent of annual sales for retailers. Last year’s holiday sales season was the worst in nearly 40 years by some measures.

Early forecasts for the 2009 holiday shopping season call for sales to be anywhere from up 2 percent to down 1 percent.

Nielsen surveyed more than 22,000 U.S. households in early September for the survey, which has a margin or error of plus or minus 2 percent.

(Reporting by Aarthi Sivaraman, editing by Gerald E. McCormick)

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Fears are increasing among more than 1,000 workers at the Navistar assembly plant in Chatham that they’ll never produce another heavy truck.

The plant has remained idle since the last ProStar and LoneStar models rolled off the assembly line almost three months ago, and there are no signs of a reopening.

U.S.-based Navistar International Corp. laid off all workers at the venerable operation after their contract expired and bargaining with the Canadian Auto Workers reached an impasse in late June.

Negotiators from both sides haven’t budged from their positions, and uneasy workers are wondering whether the company will close the plant permanently.

"There seems to be more concern among the members that it could happen," said Cathy Wiebenga, plant chair for CAW. "They (Navistar) are playing a new game. We’re being forced to play it but we don’t know what the outcome will be."

Dan Ustian, chief executive of parent Navistar, suggested publicly for the first time this month that the company could close the plant.

"But we also want to point out if we close the plant, we have not incorporated any of the closing costs or restructuring of that yet into our financials," he told analysts during a conference call to discuss third-quarter results.

The plant has operated in Chatham for more than 60 years and remains one of the community’s biggest employers.

Navistar planned on closing the plant in 2003, but reversed the decision when workers agreed to concessions and the federal and provincial governments provided more than $60 million in aid.

A shutdown would be a big blow to the southwestern Ontario region and numerous suppliers. It would follow the closing of the Sterling Trucks assembly plant in St. Thomas and the elimination of about 1,300 direct jobs earlier this year.

Ford’s assembly plant in St. Thomas is also in jeopardy of closing in 2011, which would wipe out another 1,500 jobs.

Although the Navistar plant has experienced ups and downs because of the cyclical nature of the heavy truck market in North America, Wiebenga said she has never experienced such a lengthy stoppage.

Some workers are taking temporary jobs, while others are retraining or looking for new careers.

Kevin Jack, a veteran assembly-line worker, said his anxiety about the plant’s future has increased, and he questions Navistar’s intentions as the shutdown drags on.

It’s difficult for employees to find new work, he said, because companies believe they’ll return to Navistar if the plant reopens.

"They (Navistar) are keeping us all in limbo," he said no fax cash loans. "Let us know so we can get on with our lives."

Since the start of the latest shutdown, Navistar has shifted production to a plant in Escobedo, Mexico. Wiebenga said she thinks it will be difficult for that operation to meet orders when the market improves.

Although she is not optimistic about contract talks any time soon, Wiebenga said bargaining could resume later this year because industry watchers expect the market to recover in early 2010.

Union officials say Navistar’s last proposal for extensive concessions would "gut" the existing contract, eliminating most workers’ jobs and leaving remaining employees with few rights. They say Navistar’s proposals call for widespread contracting out of work, leaving jobs for only about 100 full-time workers.

"The vast majority of workers would be voting themselves out of a job by accepting something like this," Jack said.

The union said Navistar also wants to significantly trim health benefits, freeze pensions and dramatically erode seniority rights. Changes would allow management to award jobs on the basis of ability rather than seniority.

There have been no serious discussions about wages. Under the old contract, workers earned an average of $24 an hour.

Navistar, which weathered a bitter six-week strike at the plant in 2002, has not commented on bargaining since laying off about 350 workers at the end of June. Some 700 employees were already on layoff because of slow sales.

Plant manager Craig Holmes said in an audio message to workers at the time that the operation had reached "a crossroads" and needed to become "smaller and radically different." Navistar has not revealed how much the plant workforce would shrink, or other details.

"Nothing has changed," Navistar spokesman Roy Wiley said about the status of bargaining this week. "We are willing to talk any time as long as the talks are productive."

Navistar has said economic conditions have created the "worst truck market" since 1962.

At the time of the stoppage, the Chatham plant produced 35 trucks daily. During the plant’s peak in daily output, it assembled an average of about 200 trucks a day.

In defence of the company’s proposals, Holmes said employees and retirees would maintain a good quality of life. But he acknowledged the uncertainty and level of necessary change is "tough."

He said he would update the June 30 message when appropriate. The message has remained the same.

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The first 10 firms due to list on China’s Nasdaq-style second board, ChiNext, plan to sell shares at prices 50 percent above their mainboard peers, just as worries over speculation spurred officials to tighten trading rules.

After gauging investor demand, the 10 start-up companies, including software developer Beijing Ultrapower and outdoor sportswear maker Toread, have decided on prices for their shares that average 55 times their 2008 earnings.

That compares with an average price/earnings ratio of 36 for other initial public share offerings this year on the mainland.

“Growth potential, rather than past performance, is what investors are looking at, so a high PE ratio doesn’t necessarily mean they’re over-priced,” said Jiang Jianrong, analyst at Shenyin & Wanguo Securities Co.

“But without doubt it will be quite a speculative market at the beginning because it’s new and the companies are very small.”

To curb risks, the second board for start-ups, to be launched as soon as next month in China’s southern boomtown of Shenzhen, will set an 80 percent limit on share price movements during the first day of trade, the Shenzhen Stock Exchange said on Thursday.

China is hoping that ChiNext could provide badly needed financing for the private sector, which has difficulty obtaining bank loans but is crucial to creating jobs and sustaining growth.

Beijing is also hoping that the market could become a cradle for China’s own future versions of Microsoft or Intel, helping to cut the economy’s reliance on manufacturing.

The 10 companies, which also include drug producer Chongqing Lummy Pharmaceutical and Beijing Lanxum Technology Co, a provider of office information system services, will take subscriptions from investors on Friday.

NARROW THE GAP

“Our rival Fuji Xerox is stronger than us both in branding and in financial strength,” said Lanxum Chairman Chi Yanming. “Listing on the second board would help us to narrow the gap.”

Lanxum, which is selling 5.3 million shares, said on Thursday that it plans to raise 477 million yuan ($70 million), 73 percent more than its previous fund-raising target, after pricing its IPO at 18 yuan per share, or 51.49 times its 2008 earnings.

Lepu Medical, a medical equipment maker, plans to raise 1.19 billion yuan, more than double its target, after pricing its IPO at 29 yuan a share, or 53.54 times its 2008 earnings. Lepu shares were 117.12 times over-subscribed during the road show.

Investor fervour is initially likely to push stocks on the start-up board to excessively high valuations, helping to create new Chinese billionaires.

“Some speculation is not always a bad thing. It provides easy money to private companies which had been at a disadvantage in financing compared with state-owned rivals,” said Shenyin & Wanguo’s Jiang. 

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American International Group Inc’s shares fell 5.4 percent on Tuesday after speculation that the insurer was planning to sell shares, two portfolio managers said.

The source of the speculation was not clear, although earlier on Tuesday, an article by CNBC television host Jim Cramer published on TheStreet.com argued that AIG ought to sell shares.

AIG declined to comment.

The two portfolio managers who had heard the rumors declined to comment because they are not authorized to speak to the media.

AIG’s shares closed down 5.37 percent at $45.80.

(Reporting by Dan Wilchins)

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WASHINGTON — Signaling that manufacturers are leading the economy into a recovery, output from the nation’s factories, mines and utilities posted widespread gains in August.

The August gains in industrial production marked the second straight increase after the global recession dried up the appetites of customers worldwide. Output rose 0.8 percent, the Federal Reserve said Wednesday, beating analysts’ estimates.

In part, the improvement reflected auto sales that were boosted by the government’s now-ended Cash for Clunkers program. But analysts were impressed that output rose broadly across industries. Even with autos and parts stripped out, manufacturing activity gained 0.4 percent last month.

"Vehicles are not the whole story," Nigel Gault, chief U.S. economist at IHS Global Insight, said in a note to clients.
Gault noted that production rose in five out of 10 categories of durable goods, including machinery and electrical equipment.

The pace of growth is expected to slow later this year. That’s partly because the stimulative effect of the clunkers program, which issued rebates for people who traded in older gas-guzzlers for new, fuel-efficient models, will fade.

But industrial stockpiles are so low that production should keep rising even as consumer spending remains weak, economists said. Companies had cut their stockpiles by a record $159.2 billion in the second quarter. Low inventories tend to signal higher output ahead, because companies eventually must produce more to refill their depleted stockpiles bad credit personal loan lenders.

Manufacturers "are in a catchup mode right now," Gault said. "They’re adjusting for the fact that the level of demand didn’t meet their worst fears."

Inflation remains nowhere in sight — The Consumer Price Index rose just 0.4 percent in August, after a flat reading in July, the government said. Prices fell 1.5 percent in the last year, as gasoline prices dropped sharply from record levels last summer. The "core" CPI, which excludes volatile food and energy prices, ticked up a scant 0.1 percent, matching expectations.

Buffett thinks economy has hit bottom — Billionaire investor Warren Buffett says the economy appears to have leveled off at the bottom of the recession over the summer, but Berkshire Hathaway’s CEO still isn’t seeing much improvement. "I think the odds are very much against getting significantly worse. It’s sort of plateaued at the … bottom right now," Buffett said in an interview with CNBC that aired Tuesday and Wednesday.

Labor Department reports weekly jobless claims, Commerce Department reports housing starts. STLtoday.com/business

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Boeing said it’s prepared to enter the next Air Force tanker competition with one of two planes.

The St. Louis-based defense unit of Boeing Co. on Monday offered details of its tanker proposals that would be either a KC-767 or a larger, converted 777. The latter would be comparable in size to the modified A330 offered by competitor Northrop Grumman Corp. and European Aeronautic Defence & Space Co.

"Boeing is ready to deliver maximum capability at the lowest cost," Boeing program manager Rick Lemaster said in a prepared news release Monday.

The Pentagon is preparing draft guidelines spelling out the rules for a new refueling tanker competition. Boeing will review the request before it decides what it would offer, said Bill Barksdale, a spokesman for Boeing Global Mobility Systems.

In February 2008, the Pentagon chose the Northrop/EADS proposal to build aerial refueling tankers that were larger than Boeing’s proposed KC-767 tanker. Boeing protested and was supported by the Government Accountability Office, which found problems with how the contract was awarded.

The Pentagon decided to start over and reopen the $35 billion tanker competition.

"All that matters is the Air Force and what they want," Barksdale said. "If they want a bigger tanker, we have one that is definitely superior" to the A330.

Part of Monday’s message is that "the other guys don’t have a permanent advantage" with respect to the size of its tanker proposal, said Richard Aboulafia, an analyst with the Teal Group in Fairfax, Va. But converting the 777 into a refueling tanker would likely take time and money, he said.

"This is supposed to be an off-the-shelf procurement," Aboulafia said.

Boeing has produced some of the KC-767s already, including three that are in operational squadrons for the Japanese air force, Barksdale said. If it wins the contract, Boeing projects 50,000 jobs will be dedicated to the tanker. The planes would be built in Washington state.

Boeing officials provided the details at the Air Force Association’s 2009 Air and Space Conference and Technology Exposition near Washington, D.C. The company also has launched a website devoted to its refueling tanker options called UnitedStatesTanker.com

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