The European debt crisis is raising the odds of a U.S. recession, with economic contraction more likely than not by early 2012, according to research from the San Francisco Federal Reserve Bank.
While it is difficult to gauge the odds precisely, an analysis of leading U.S. economic indicators suggests a rising chance of a recession through the end of the year and into early next year, researchers at the regional Fed bank wrote Monday. The risk of recession recedes after the second half of 2012, they found.
French rates rise, threatening rating
PARIS — The interest rate France pays to borrow money rose again Monday — and along with it fears that the country will lose its cherished AAA credit rating.
Theoretically at least, that rating — the highest a nation can have — allows France to borrow money from the markets cheaply.
But France pays more than nearly every country that has a Triple A rating from all three of the major ratings agencies, except Australia, whose economy is less than half the size, and tiny Austria, which pays about the same rate.
On Monday, the yield on France’s 10-year bond — the usual yardstick for a country’s borrowing costs — rose 0.05 percentage points to 3.42 percent. That’s nearly twice Germany’s and significantly more than the roughly 2 percent paid on 10-year U.S. Treasury notes.
Some say with yields that high, France retains the AAA rating in name only, since the country has already lost the benefit of the rating, namely low borrowing costs.
Oil price falls as investors worry
NEW YORK — The price of oil fell to near $98 per barrel Monday as investors continued to worry about Europe’s debt problems.
Benchmark crude gave up 85 cents to end the day at $98.14 per barrel in New York, while Brent crude, used to price many international varieties, lost $2.27 to finish at $111.89 per barrel in London.
The European debt crisis has yanked oil prices up and down for the past few months as traders assess whether massive debt burdens in Greece and Italy will mean bank failures and perhaps another recession. An economic slowdown across the region would mean weaker demand for oil.
Bank of America to shed Chinese bank
CHARLOTTE, N.C. — In its latest step to build capital amid continued questions from regulators and investors, Bank of America Corp. has agreed to sell most of its remaining shares in China Construction Bank Corp., the bank said Monday.
The Charlotte-based lender, the nation’s second-largest by assets, said it will sell 10.4 billion common shares through private transactions with a group of investors <0x2014> a deal expected to yield an after-tax gain of about $1.8 billion.
The sale will leave Bank of America with a 1 percent stake in CCB, one of China’s biggest banks. It’s part of Chief Executive Brian Moynihan’s ongoing strategy to shed noncore assets to improve efficiency and boost capital in the face of new international standards.
Bank of America shares closed at $6.05 Monday, down about 2.6 percent as persistent worries about the eurozone crisis drove down financial stocks.