The credit crunch, increasing cost of materials and lower demand abroad are expected to decrease the profits of nonfinancial companies, which have so far been resilient. The companies have cut costs and increased productivity and prices, but the second half of the year is expected to be particularly challenging.
Better-than-expected quarterly results from Wells Fargo helped boost financials, leading to a rally in Asian markets Thursday. The Nikkei 225 Average in Tokyo gained 0.9%, the Hang Seng Index in Hong Kong added 2.3% and China's Shanghai Composite upped 0.8%. The S&P/ASX 200 in Australia increased 0.8%, the NZX 50 index in New Zealand was up 0.9% and the Kospi in South Korea advanced 1.6%. The Straits Times Index in Singapore jumped 1.5%, and Taiwan's Weighted index gained 2.9%.
The Senate Permanent Subcommittee on Investigations said UBS and LGT Group, a bank in Liechtenstein, helped affluent American clients hide assets and evade taxes. According to the panel's report, UBS hid nearly $18 billion for 19,000 U.S. clients. "UBS has opened thousands of accounts in Switzerland that are beneficially owned by U.S. clients, hold billions of dollars in assets, and have not been reported to U.S. tax authorities," according to subcommittee's report.
Volkswagen plans to open a factory in Chattanooga, Tenn. The plant arrives 20 years after the German automaker ended production in the U.S. and comes as Volkswagen seeks to regain American market share.
Although central bankers are concerned with rising inflation, the Federal Reserve's policy on interest rates may be suspended indefinitely as the global financial crisis continues. Fed Chairman Ben Bernanke surprised market participants by reversing his stance on the Fed's most urgent focus from curbing inflation to stabilizing financial markets. The about-face was apparently prompted by a series of meetings to come up with a rescue plan for Fannie Mae and Freddie Mac.