The global economic slowdown

Caterpillar Crawling: More Evidence of the Global Slowdown

Another big corporate bellwether Caterpillar joined the parade of evidence drawing a picture of a global slowdown.

WSJ,

25 September, 2012

Caterpillar late last night lowered its outlook through 2015, citing weaker demand for construction and mining equipment. It’s another sign that the global slowdown we’ve been writing about is real and is pervasive. You don’t cut three years worth of forecasts if you expect a quick turnaround. Shares are down about 3% this afternoon.

Caterpillar trimmed a cool $2 billion from its 2015 sales forecast ( to a still-healthy $80-$100 billion range), but doesn’t foresee a recession on the horizon, and CEO Dough Oberhelman was adamant that that the company wouldn’t cut its dividend.

But the signs are mounting. Caterpillar FedEx FDX -0.73%, Maersk, too. The big international shipper announced today it’s going to trim its capacity amid a capacity glut, lower cargo volume and a squeeze on rates.

This dovetails with a point we made last week about the shipping industry. It’s slowing down, reflecting the slowdown in the global economy. The obvious source of all of this is Europe, which collectively represents the world’s largest economy. But it’s showing up in China as well, and it’s showing up to an extent here in the U.S. as well.

It’s definitely showing up in corporate earnings, as more and more multinationals, like Caterpillar, like FedEx, see the manic profit growth numbers of the past few years tail off. It’ll be tough sledding in the foreseeable future, and that isn’t good for employees, who already got run through the wringer when corporations were trimming the fat, as they say.

This isn’t having much effect on a QE-soaked marketplace, however. “The warning from the world’s largest maker of mining equipment is not shoving the broad markets into reverse, not at least for now,” Andrew Wilkinson at Miller Tabak wrote.

The big debate now is what’s driving the markets, the fundamentals, or the Fed. If the answer is the former, then one might wonder exactly which fundamentals are producing near-record stock indexes.

Asia-Europe Container Trade

Turns Unprofitable Due To

Fuel Cost Crawling: More 

Evidence of the Global

Slowdown

Container shipments from Shanghai to Europe have turned unprofitable as the sovereign debt crisis hurts demand from consumers and companies including Maersk Line struggle to pass on fuel costs, figures released.

mb.com,

25 September, 2012

Spot prices fell 3.8 percent to $1,172 per standard container in the week ended Sept. 21 after dropping 5.1 percent in the previous seven days, and have tumbled 38 percent since June 29, according to London-based ship broker ICAP Plc.

Shippers need rates of $1,200 to $1,350 a box to make money on the route linking producers in China with markets in Europe, according to Kai Miller, head of ICAP’s container desk. This week marks the first time rates have fallen below that level since Feb. 24, the broker’s data shows, and suggests earnings at companies including Maersk and Hapag-Lloyd AG may come under pressure in the usually buoyant second half, when retailers stock up with Asian goods for the Christmas shopping season.

“Break-even rates are higher than in previous years due to still-soaring bunker fuel prices,” Miller said by e-mail. “Rates will continue to stay under pressure in the fourth quarter as overcapacity is still not matched by a recovering macro economy. Profits will subsequently decline again, with potential losses.”

Copenhagen-based A.P. Moeller-Maersk A/S’s market-leading Maersk, which suffered a $372 million net loss in the first half, said Aug. 14 it expected a “modest” full-year profit after shippers raised rates. Germany’s Hapag-Lloyd said the same day that further rate increases were “crucial” for it to offset rising fuel costs and post an annual operating profit.

For article GO HERE

Ford to axe 'hundreds' of jobs

in Europe

US car giant Ford has said that it will cut several hundred
 

jobs in Europe because of declining demand, including in the

UK.

BBC,

25 September, 2012

Jobs will also go in Germany and in other parts of Europe.

The carmaker will offer voluntary buyouts for staff and cut jobs for "agency workers and purchased service", it said.

Ford has warned its European operations could suffer losses of $1bn (£630m) this year.

The carmaker has said it does not yet know the final number of axed workers in Europe.

Ford employs 15,000 workers in the UK and has plants at Southampton and Dagenham, among others.

For article GO HERE