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Taiwan’s economy probably exited the deepest recession on record last quarter as the global recovery spurred demand for the island’s semiconductors and mobile phones, according to a survey of economists.

Gross domestic product increased 7.1 percent in the three months through December from a year earlier, the median of the Bloomberg News survey’s nine estimates shows, after contracting for the previous five quarters. The report will be released on Feb. 22 at 1:30 p.m. in Taipei.

The emergence of the world economy from the worst slump since World War II spurred businesses in Taiwan, where exports equal half of GDP, to boost production and hire more workers. President Ma Ying-jeou is negotiating a trade accord with China that would cut import duties on Taiwanese goods in the world’s fastest growing major economy and help cement the recovery.

“Taiwan is ‘out of the woods’ for as long as the global economy is — and is particularly benefitting from a surge in growth in China,” said Dariusz Kowalczyk, chief investment strategist in Hong Kong at SJS Markets Ltd. “Since inflation in bound to return, we expect the central bank to begin raising rates in April, with 50 points of tightening likely in 2010.”

Taiwan’s exports to China, its biggest trading partner and No. 1 overseas investment destination, soared 187.8 percent in January from a year earlier, after a 96.7 percent gain in December. Shipments to the U.S., the second largest export market, rose 13.7 percent after increasing 4 percent in December.

Surging Profits

Stronger demand for electronics helped Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., the world’s largest makers of custom chips, post fourth-quarter profits that beat analysts’ estimates and boost capital spending this year.

The economy is emerging from the worst recession since records began in the 1950s. Central Bank Governor Perng Fai-nan kept interest rates unchanged at a record-low 1.25 percent on Dec. 24, after slashing them by 2.375 percentage points from September 2008 to February 2009 to revive the economy.

The unemployment rate fell for a third month in December after reaching a record 6.09 percent in September. Taiwan Semiconductor, the island’s biggest company by market value, said it plans record spending this year and will add more than 3,000 engineers.

“Local exporters have been reporting good sales figures in the fourth quarter because of rising demand from overseas,” said Lee Ming-han, an economist at Sinopac Bank in Taipei. “Domestic consumption also improved on a falling jobless rate and gains in the stock markets.”

China Accord

President Ma’s administration has been pushing for the trade agreement with China to prevent Taiwan from being “marginalized” after a Chinese accord with the 10-member Association of Southeast Asian Nations took effect this year.

China and Hong Kong combined is Taiwan’s largest overseas market, accounting for 40 percent of the island’s $203.7 billion of exports last year. Overseas shipments of flat screens, computer chips and other electronics goods made up about 28 percent of the total. Asean, which represents a quarter of the world’s population, accounts for 15 percent of Taiwan’s exports.

The government estimates the so-called Economic Cooperation Framework Agreement with China would increase GDP by 1.65 to 1.72 percentage points annually, spurring exports and creating more than 260,000 jobs. Exports would rise as much as 5 percent a year and imports by 7 percent, it says.

Opposition Rally

The opposition is against signing the accord and is calling for a public referendum. The Democratic Progressive Party on Dec. 20 rallied 100,000 people into the streets of Taichung city to protest Ma’s China policies, on concern that they will erode the island’s sovereignty.

China and Taiwan have been ruled separately since Nationalist troops fled to the island after losing a civil war to Mao Zedong’s Communist forces in 1949. China has threatened to invade Taiwan if it declares formal independence, and in 2006 carried out a weeklong series of missile tests near the island.

The risks to Taiwan “are centered around the global outlook, which is strong only in the short term,” Kowalczyk of SJS said. “By late 2010 and early 2011 we see a double dip in G-3 economies, which will trigger a slowdown. This is bound to hit Taiwanese exports and reduce its growth rate in 2011.”

Taiwan’s currency climbed 0.3 percent to close at NT$32.1 against the U.S. dollar on Feb. 12, the last trading before the Lunar New Year holiday, according to Taipei Forex Inc. The benchmark Taiex index gained 1.1 percent, after surging 78 percent last year, the best performance since 1993. Taiwan’s financial markets will resume trading on Feb. 22.

Export Growth

Taiwan is aiming for 22 percent growth in exports in 10 markets this year, including China, India, Japan, Russia and Brazil, the Ministry of Economic Affairs said last month. The island’s statistics bureau forecast in November that exports would increase 15.4 percent this year.

Nanya Technology Corp. last month reported NT$211 million ($6.6 million) profit in the fourth quarter, after posting losses in the previous 10 quarters, as demand for computers rebounded and prices of semiconductors rose. Smaller rival Powerchip said Jan. 20 that its fourth quarter profit exceeded NT$1.6 billion.

Taiwan Semiconductor, the island’s biggest company by market value, plans record spending of $4.8 billion on equipment and factories this year after reporting fourth-quarter profit more than doubled to NT$32.7 billion.

Prime View International Co., the screen supplier to Sony Corp.’s Reader and Amazon.com’s Kindle e-book readers, plans to triple its capacity in the U.S. and China this year on rising orders, Chairman Scott Liu said in an interview last month.

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Chicago-based Berlin Packaging said Monday it will acquire All-Pak Inc., a packaging supplier based in Bridgeville, near Pittsburgh.

Berlin Packaging describes itself as a "full-service supplier of plastic, glass and metal containers and closures." All-Pak evolved from the former Cunningham Glass Co., which has been in the Pittsburgh area for some 50 years.

Terms of the deal were not disclosed Monday, and it was not clear whether any Pittsburgh-area layoffs would result from the acquisition.

According to a news release, the combined company, which will be headquartered in Chicago, will have annual revenue approaching $500 million. All-Pak will maintain a "significant operational presence at all of its geographical locations," according to the release.

The acquisition is expected to close by the end of February, according to the release.

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European Central Bank President Jean- Claude Trichet is struggling to convince investors that the euro region shouldn’t be punished for Greece’s budget problems.

As the Greek government tries to control its record deficit and the country’s bonds slide, Trichet yesterday said the economy of the 16-nation euro area is solid and its budget shortfall will probably be smaller than those of the U.S. and Japan this year. The euro nevertheless fell more than half a cent against the dollar and Spanish and Portuguese stocks dropped on concern they are in a similar predicament to Greece.

Trichet “did not convince me,” said Stuart Thomson, who helps manage $100 billion at Ignis Asset Management in Glasgow, Scotland. “Where does he think the Greek, Spanish and Portuguese economies will be three years from now? Their austerity measures will weigh on the euro area as a whole.”

Trichet has been forced to fend off questions about the survival of the euro as investors doubt Greece’s ability to cut its deficit from 12.7 percent of gross domestic product to below the European Union’s 3 percent limit. As concern spreads to Spain and Portugal’s rising debt burdens, Trichet will try to stress the need for fiscal prudence without inflaming skepticism that it can be achieved.

“Something has to happen to turn credibility around,” said Paul Mortimer-Lee, head of Market Economics at BNP Paribas in London. “The market’s just saying it’s not believable. It might have to get worse before it gets better.”

Markets Shudder

Spanish stocks dropped the most in 15 months yesterday and Portugal led declines in government bonds. The euro fell to $1.3728, its lowest level against the dollar since last May. It has dropped more than 9 percent since Nov. 25.

Greek bonds have tumbled in the past two months, pushing the yield on the country’s 10-year debt above 7 percent, the highest since 1999, the year the euro was introduced. The premium investors charge to hold Greek 10-year bonds over the benchmark German bund has widened to 356 basis points, about 10 times what it was two years ago.

The ECB yesterday left its benchmark rate at a record low of 1 percent and Trichet signaled the bank is in no rush to raise borrowing costs as the economy recovers gradually from its worst recession since World War II.

Still, Trichet said the “solidity” of the euro area “is not necessarily very well known” and its situation compares “very flatteringly with a number of other industrialized countries.”

Gradual Recovery

The euro-area economy will grow 0.8 percent this year and 1.2 percent in 2011, according to the ECB’s December forecasts. It contracted 4 percent last year, the European Commission estimates.

“Trichet is still trying to persuade markets that they should be looking at the euro area as a whole, which does not look that bad, rather than at individual countries, some of which look extremely fragile,” said Marco Annunziata, chief economist at UniCredit SpA in London.

Spain’s public debt will rise to 74 percent of GDP by 2011 from 54 percent last year, according to European Commission forecasts. Greece’s debt will increase to 135 percent of GDP from 113 percent, and Portugal’s will increase to 91 percent from 77 percent, the EU estimates.

Greece’s consolidation plans, which call for about 10 billion euros ($13.7 billion) of spending cuts and revenue increases this year, are more ambitious than any budget reduction achieved by euro-region countries since the 1970s, according to ING Group.

Greece’s biggest union yesterday approved a second mass strike this month to protest the spending cuts and tax collectors began a 48-hour walkout, illustrating the difficulty Prime Minister George Papandreou faces in implementing his plan.

“We expect and we are confident that the Greek government will take all the decisions that will permit them to reach that goal,” Trichet said. Additional proposals announced by Greece this week to freeze public-sector wages and revamp the pension system “are steps in the right direction,” he said.

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Spending by U.S. consumers increased in December for a third consecutive month, signaling the biggest part of the economy will contribute more to growth in coming months.

The 0.2 percent increase in purchases was less than anticipated and followed a 0.7 percent gain in November that was larger than previously estimated, Commerce Department figures showed today in Washington. Incomes climbed 0.4 percent, exceeding expectations.

Retailers such as Amazon.com Inc. are posting profits on increased sales as Americans spent more this past holiday season than the year before. Employment is key to propelling bigger gains in spending, one reason the Obama administration is proposing a fiscal 2011 budget today that calls for $100 billion in additional stimulus focusing on jobs.

“Consumers have the wherewithal to support good spending, however they are going to be reticent until they see a few good months of job gains,” said Craig Thomas, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, who correctly forecast the gain in spending. “2010 is lined up to be a moderately good year.”

Stock-index futures held earlier gains following the report. The contract on the Standard & Poor’s 500 Index rose 0.6 percent to 1,076.5 at 9:10 a.m. in New York. Treasury securities fell.

The median estimate of 65 economists surveyed called for a 0.3 percent increase in spending, after an originally reported gain of 0.5 percent the prior month. Projections ranged from no change to 0.7 percent.

Income Gains

The gain in incomes followed a 0.5 percent increase in November and exceeded the 0.3 percent median estimate in the Bloomberg survey. Wages and salaries climbed 0.1 percent in December after increasing 0.4 percent the prior month.

Today’s report showed prices were stabilizing. The inflation gauge tied to spending patterns rose 2.1 percent from December 2008, less than the survey median forecast.

The Fed’s preferred price measure, which excludes food and fuel, climbed 0.1 percent in December from the previous month and was up 1.5 percent from a year earlier.

Adjusted for inflation, spending climbed 0.1 percent following a 0.4 percent rise the prior month.

Because the increase in spending was smaller than the gain in incomes, the savings rate rose to 4.8 percent from 4.5 percent the prior month.

Disposable income, or the money left over after taxes, increased 0.4 percent.

Better Sales

Amazon, the world’s largest Internet retailer, posted profit and sales that beat analysts’ estimates and said revenue growth may accelerate this quarter as consumers start spending more following the recession. Sales may rise as much as 43 percent to $7 billion in the first quarter, more than last year’s 18 percent growth, the Seattle-based company said last week in a statement. Analysts surveyed by Bloomberg had estimated sales of $6.42 billion.

Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, climbed 0.2 percent in December after rising 2.3 percent the prior month.

Purchases of non-durable goods decreased 0.8 percent, and spending on services, which account for almost 60 percent of all outlays, increased 0.4 percent.

The economy grew at a 5.7 percent annual rate in the fourth quarter, exceeding the median forecast of economists surveyed, figures from the Commerce Department showed last week. Consumer spending, which accounts for 70 percent of the economy, climbed at a 2 percent pace, also exceeding expectations.

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A unit of Smith International Inc. has taken over a three-year contract with Petróleo Brasileiro, Brazil’s state-owned energy giant.

Houston-based Smith (NYSE: SII) will operate the Petrobras contract through its PathFinder Energy Services unit at its new facility in Macae, Brazil.

The deal represents possible revenue of between $80 million and $100 million business card design. PathFinder will also acquire all related directional drilling assets from San Antonio International do Brasil.

San Antonio International had previously been the lead contractor through which PathFinder had taken on contracts in that country, Smith officials said in a statement.

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After surging 10% in October, sales of existing homes jumped again in November, growing 7.4% compared with October to an annualized rate of 6.54 million units, according to the National Association of Realtors.

"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit," said NAR’s chief economist, Lawrence Yun.

November was originally going to be the last month in which sales to first-time homebuyers would qualify for a federal tax credit of up to $8,000. However, that deadline was extended through June.

In addition, the tax credit was expanded to cover people who already own a home. They can qualify for a $6,500 tax credit if purchase a new house before the end of June. That should encourage "trade-up" buyers.

The strength of sales in November surprised the industry. A panel of experts compiled by Briefing.com had forecast month-over-month sales growth of just 2.5% to 6.25 million from 6.1 million a month earlier.

The sales total was also a huge improvement over a year ago. Sales rose 45.7% over the paltry annualized rate of 4.49 million units during November 2008.

The contribution made by first-time buyers is evident in a separate survey NAR conducted of its members. They estimate that 51% of sales in November were by newcomers to the market, up a point from 50% in October. Normally, first timers account for about 40% of sales.

Also propelling sales higher were rock-bottom interest rates. The average for a 30-year, fixed-rate loan during the month was just 4.88%, down from 4.95% in October and 6.09% a year ago.

With rates that much lower, homebuyers can save more than $150 a month on a $200,000 mortgage.

The industry expects home sales to slacken December, partially because of the tax credit’s originally scheduled demise. That caused some buyers to push up their closing, stealing sales from December.

However, sales will not fall off a cliff, though, according to Walter Molony, a NAR spokesman payday loans with no faxing. "The psychology seems to be turning around," he said. "Potential buyers, who had been staying on the fence, now believe we’re at or near the market bottom."

One X-factor, however, is the vast numbers of homes that may come to market over the next few months. There is a large "shadow inventory" — homes owned by banks and mortgage companies — that have not yet been put up for sale. It could be as many as 1.7 million units, according to First American CoreLogic.

In addition, another spate of foreclosures could be hitting the market as a number of option-ARM mortgages are set to default.

All that may drive prices down, according to Shari Olefson, author of "Foreclosure Nation: Mortgaging the American Dream." And the impact of these renewed price declines could again alter the market psychology.

"People think that prices have bottomed," she said. "I don’t think they have. People will see price declines and that will discourage them from buying."

Mike Larson, a real estate analyst with Weiss Research has preached all through the bust that price declines are what will "fix" the housing crisis.

"We needed to see prices fall to make ownership competitive with renting again, and to restore the normal relationship of house prices to income," he said. "That has now happened and you’re seeing buyers come out of the woodwork as a result."

Still, they will have to come out in large numbers to offset the inventory overhang in some of the worst markets, according to Olefson. In the Florida condo market, for example, there is a 35-to-40 month supply of units at the current rates of sale, she said.

Prices still almost certainly have further to fall. 

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Human Genome Sciences Inc. announced today it’s submitted its second application so far this year to federal regulators to sell a drug on the market, this most recent being for its hepatitis C treatment called Zalbin.

With these applications, including a third that the Rockville biotech plans to submit in the first half of next year for a lupus treatment, Human Genome Sciences hopes to sell its first drugs on the commercial market by the end of next year — a major milestone for the 17-year-old company.

In May, Human Genome Sciences applied to the Food and Drug Administration for approval to sell its anthrax treatment, though that submission hit a stumbling block earlier this month when regulators said they still needed further information before they could sign off on it. The company has already sold several lots of that drug to the federal government for its national stockpile.

For Zalbin, Human Genome Sciences (NASDAQ:HGSI) is relying on results from two late-stage human clinical studies that enrolled a total 2,255 patients. The data showed that Zalbin performed comparably to its competitor, F. Hoffmann-La Roche Ltd.’s Pegasys, with half the number of injections — every two weeks instead of every week.

But those results, while meeting federally set endpoints, failed to excite Wall Street, which drove down the company’s stock price by 55 percent in one day to new lows below $1. Analysts said at the time that the study data didn’t differentiate Zalbin enough from the pharmacy’s current offerings and expressed skepticism that the fewer dosages alone could attract enough physicians and patients to result in healthy market share fast cash advance loan.

Instead, investors are more anxiously awaiting Human Genome Sciences’ third offering to the commercial market: what could be the first federally approved lupus treatment in decades. The local company’s drug, called Benlysta, exceeded expectations in two late-stage studies announced in July and November, sending the company’s market cap and stock soaring to new 52-week highs.

Under a partnership agreement signed in 2006 with Novartis AG for Zalbin, Human Genome Sciences will sell the drug jointly and share equally in costs and profits for U.S. sales if it gets approved. Novartis will apply by year’s end for approval to sell the drug in other countries, starting with Europe, under the brand name Joulferon.

The partnership will yield Human Genome Sciences royalties, and as much as $300 million more in payments from Novartis for meeting certain regulatory and commercial milestones.

The Centers for Disease Control and Prevention estimate that about 3.2 million Americans have chronic hepatitis C, a viral infection that kills 8,000 to 10,000 people each year.

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Boxing Day deals in November?

As the economy continues to wobble, Canadian retailers are offering deeper discounts, keeping stores open longer, and using frequent and sometimes shorter sales to attract whatever holiday shoppers might be in the market this year.

Sears Canada said Thursday it is offering "Boxing Day" pricing on a wide range of items this weekend. For three days only.

Wal-Mart Canada said it’s dropping a "record number" of prices between now and Christmas to help Canadians stay on budget this holiday season.

The retailers cite specific discounts on everything from iPods to cooking sets and clothing.

While the idea of offering Boxing Day deals ahead of Christmas started a few years ago, this could be the first time the term has been used this early in the season, industry analysts said.

They say it’s an indication just how competitive holiday sales could become this year as unemployment remains stubbornly high and consumers worry about future job losses.

"For sure the consumer is very price sensitive and so those who offer the opening price points, the sense there will be good deals, are going to attract more traffic into the stores," said Wendy Evans, president of the retail consulting firm Evans and Company.

The idea is to grab consumers’ attention and an early share of the holiday market "by creating the perception of being very price oriented," Evans said.

Grocery stores, like Loblaw Cos. Ltd., which now sell clothing as well as food, are predicting price competition this holiday season will be fierce. That means department stores, like Sears, "are going to be dragged into the fray," Evans said.

Sears Canada’s chief executive officer Dene Rogers vowed earlier this week to use "aggressive marketing" strategies to boost sales, noting consumers are worried about future employment.

The retailer, which reported Wednesday that sales fell 7.6 per cent to $1.3 billion in the previous three months, wants "to convey to customers that we have the holiday season’s most wanted products at prices that can’t be beat," Rogers said.

Wal-Mart Canada, which said it expects to cut prices on 18,000 items this month, 20 per cent more than last year, said it’s trying to help Canadians make their dollars go further.

The price-cutting comes as a new survey suggests this will be the worst season for holiday shopping since 2005.

Just under six in 10 Canadians say they plan to spend the same amount as they did last year, about one-third plan to spend less and 8 per cent plan to spend more, according to TNS Canadian Facts.

"We often hear talk of so-called cautious optimism. But these results suggest now is a time for cautious negativism. Clearly, the floor hasn’t collapsed but it might be time to start looking for cracks," TNS vice-president and research director Michael Antecol said in a statement.

The Toronto-based research firm’s Consumer Confidence Index now stands at 95.5 points. That’s down 2.5 points since last month and down 3.7 points since August.

The numbers have slipped in all categories, TNS also said. Consumers are less confident about the present and the future and also say they’re less likely to make a big purchase at this time.

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Japanese Trade Minister Masayuki Naoshima apologized for speaking about third-quarter GDP data to oil industry executives on Monday ahead of its official release.

“I’m sorry. I honestly didn’t know it was due to be released at 8:50 a.m. (2350 GMT) so I thought it would be OK to talk about it,” Naoshima told reporters.

“I apologize for causing trouble and I’ll be careful from now on.”

Naoshima added that he told the industry officials about the GDP figures because people were concerned about the state of the economy.

(Reporting by Tetsushi Kajimoto; Writing by Chris Gallagher; Editing by Rodney Joyce)

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The U.S. dollar may come under renewed pressure from emerging market currencies and the euro after a meeting of the world’s top finance officials failed to take concrete action on rebalancing global money flows.

Finance ministers and central bank governors of the Group of 20 major countries, meeting in Scotland at the weekend, launched a "framework" in which they will discuss how to reduce trade and savings imbalances between nations.

But their communique talked only in general terms about rebalancing economies, and implied they might not agree on specific policies for individual countries to adopt before the end of next year at the earliest.

The result may be a continuation of heavy fund flows into emerging markets, boosting currencies there. And central banks intervening to slow currency appreciation may keep investing much of the money they obtain in the euro, pushing up that currency too.

"We’re probably looking at fresh dollar weakness in the short term" in the wake of the G20 meeting, said Kenneth Broux, senior markets economist at Lloyds TSB.

China, Brazil

At the center of the currency issue is China’s reluctance to permit appreciation of its tightly controlled yuan, which it has kept flat against the dollar since mid-2008.

That has prompted additional fund flows into emerging market currencies that do trade freely, such as the Brazilian real, which has soared over 30% this year. Last month, Brazil slapped a 2% tax on foreign investments in fixed income and stocks in an effort to slow the real’s rise.

Last week, Brazilian officials said they would discuss this problem at the G20 meeting. But the G20 communique made no reference to the issue, and Brazil appeared to get little sympathy from a senior official of the International Monetary Fund, which is a key player in the global rebalancing campaign.

Youssef Boutros-Ghali, who chairs the International Monetary and Financial Committee, the IMF’s policy steering committee, told Reuters that Brazil’s tax was unlikely to work and that "we should not be fixated on currencies".

Officials from several countries, including Brazil, Japan and Indonesia, urged China on the sidelines of the meeting to let the yuan move more flexibly.

But as a group, the G20 did not press China on the sensitive issue, G20 sources said. British finance minister Alistair Darling told reporters: "We didn’t discuss the renminbi payday loans for bad credit. I think that’s a question for China rather than us."

In fact, China appeared in a combative mood. Finance Minister Xie Xuren and central bank governor Zhou Xiaochuan, speaking to the official Xinhua news agency after the meeting, made no mention of the yuan and instead warned developed countries to focus on the quality of their own policies.

Xie said countries with global reserve currencies should work to maintain the currencies’ value, to avoid destabilizing the global economy — implying it was up to Washington, not Beijing, to resolve the issue of the weak dollar.

The silence on the yuan in Scotland suggested countries accepted the G20 was not a forum in which to press China. The other main global economic forum, the Group of Seven nations, last met in October; it did mention the yuan, but only in the softest terms, "welcoming China’s continued commitment" to free up the yuan without referring to a timetable.

Rebalancing

The G20 did publish a detailed, unprecedented timetable for countries to discuss the economic rebalancing that could eventually bring more stability to global currency markets.

In an appendix to the communique, G20 countries were asked to submit descriptions of their monetary, fiscal and other policies and plans to the IMF by the end of January 2010. The IMF would produce an analysis of the global economy by April.

G20 countries would then "develop a basket of policy options" in June, and G20 leaders would consider recommendations for policies at a summit in November 2010.

But this plan is clearly constrained by diplomatic sensitivities. For example, the appendix said that, in the first half of next year, the IMF would not recommend policies for specific countries but merely for "groups of countries facing similar circumstances" — apparently ruling out an explicit recommendation to appreciate the yuan.

So in the short term, currency market trends look as if they will be left to continue, said Simon Derrick, senior currency strategist at Bank of New York Mellon in London.

"It is hard to imagine a level playing field for currencies without resolving the issue of the yuan," he said. 

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