FedEx cuts profit forecast, citing weather, fuel costs

FedEx Corp. on Monday sharply cut its quarterly profit forecast, citing higher-than-expected fuel costs and severe weather that disrupted delivery operations in the U.S. and Europe.

The world’s second-largest package delivery company now expects an adjusted profit of 70 to 90 cents per share for its fiscal third quarter, which ends Feb. 28. That’s down from the company’s earlier forecast for profit of 95 cents to $1.15.

Analysts surveyed by FactSet expect FedEx to post a profit of $1.06 per share, on average.

The company’s updated forecast assumes no further weather impact and stable fuel prices for the rest of the quarter. FedEx, based in Memphis, Tenn., said those factors also would affect its full-year financial forecast, which will be updated when the company reports third-quarter numbers on March 17.

Japan confirms China surpassed its economy

Japan confirmed Monday that China’s economy surpassed its own as the world’s second largest in 2010 and said a late-year downturn was its first quarterly contraction in more than a year.

Japan’s economy expanded 3.9 percent in the calendar year in the first annual growth in three years. But it wasn’t enough to hold off a surging China. Japan’s nominal GDP last year came to $5.4742 trillion, less than China’s total of $5.8786 trillion, the Cabinet Office said. China, however, remains far poorer with GDP per person about a fifth of that in Japan even when purchasing power differences in each country are taken into account.

China was acknowledged last year as having surpassed Japan as the world’s No. 2 economy – a title it had held since 1968. But full-year Japanese data confirming it were not available until Monday. The historic shift underscores the nations’ stark contrasts: China is growing rapidly and driving the global economy, while Japan is struggling with persistent deflation, an aging population and ballooning public debt.

At the same time, the rise of its Asian neighbor has been critical for Japan’s own economic engine. China is now Japan’s biggest trading partner and a significant source of growth for Japanese companies like Toyota Motor Corp. and Canon Inc.

 

Spike in food prices pushes Chinese inflation higher

A jump in food prices pushed China’s inflation higher in January, adding to pressure on Beijing to control surging living costs.

Consumer prices rose 4.9 percent, driven by a 10.3 percent rise in food costs, government data showed. That was a rebound from December’s 4.6 percent rate and close to November’s 28-month high of 5.1 percent.

Beijing has hiked interest rates repeatedly to cool rapid economic growth and inflation pressures. But analysts say inflation is being driven by tight food supplies at a time of soaring demand — a problem the government cannot quickly fix.

Private-sector analysts expect more interest rate increases this year but say such moves alone cannot bring down inflation. Many expect inflation to go even higher before peaking later this year.

Chinese provinces ordered to step up irrigation efforts

Provinces in China’s severely parched northeast have been ordered to step up emergency irrigation as part of a $1 billion effort to minimize the loss of crucial wheat crops.

China is the world’s largest wheat-growing nation but its wheat belt has gotten virtually no precipitation since October. Expected shortages of the crop in China have already pushed up global prices for the commodity.

The government’s Office of State Flood Control and Drought Relief Headquarters said in an online statement late Sunday that the drought situation remained “grim” and urged local officials to dig more wells and carry out other emergency measures.

The U.N.’s food agency has warned the drought is driving up China’s wheat prices, and now the focus is on whether China will buy more from the global market, where prices have risen about 35 percent since mid-November.

AOL chief invests $10 million in shares of company’s stock

AOL CEO Tim Armstrong is making a $10 million bet that his turnaround strategy will pay off. He just invested that amount of money in 477,000 shares of the company’s stock.

In a Monday filing with the Securities and Exchange Commission, Armstrong reported buying the shares at an average weighted price of $20.97 apiece on Friday. The move raises his stake in the struggling Internet company to about 4 percent, according to AOL.

Armstrong now owns 876,511 of AOL’s common shares directly and 709,157 shares indirectly through his private investment company Polar Capital Group LLC and through Armstrong Family Investment LLC. He also owns millions of stock options and other incentives that AOL has given him since luring him away from Google Inc. to become its CEO in April 2009.

Rates on short-term T-bills fall to lowest since Nov. 8

Interest rates on short-term Treasury bills fell in Monday’s auction to the lowest levels in three months.

The Treasury Department auctioned $32 billion in three-month bills at a discount rate of 0.130 percent, down from 0.150 percent last week. Another $30 billion in six-month bills was auctioned at a discount rate of 0.165 percent, down from 0.175 percent.

Both rates were the lowest since Nov. 8, when three-month bills averaged 0.125 percent and six-month bills averaged 0.160 percent.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,996.71 while a six-month bill sold for $9,991.65. That would equal an annualized rate of 0.132 percent for the three-month bills and 0.167 percent for the six-month bills.

Berkshire Hathaway sells smaller U.S. stock holdings

Warren Buffett’s company has sold off some of the smaller investments in its $53 billion U.S. stock portfolio during the fourth quarter, including Bank of America, Comcast, Nike and Lowe’s.

Berkshire Hathaway Inc. revealed a number of changes in its holdings Monday in documents filed with the Securities and Exchange Commission.

Berkshire also eliminated holdings in Becton Dickinson, Fiserv, Nalco Holding Co. and Nestle.

Officials at the Omaha-based company Buffett leads as chairman and CEO said no one was immediately respond to a request for comment.

Lawsuit: BP official resigned over safety before explosion

A lawsuit claims a former BP official resigned months before the rig explosion that led to the worst oil spill in U.S. history because of disagreements with the oil giant about its commitment to safety.

The amended lawsuit on behalf BP investors was filed Monday evening in Houston federal court. It says Kevin Lacy, BP’s former senior vice president for drilling operations for the Gulf of Mexico, resigned because he believed the company wasn’t adequately committed to improving its safety protocols in offshore drilling operations to the level of its industry peers.

The claims are part of a suit from last year that alleges BP inflated its stock price by making false statements about its safety practices before the Gulf of Mexico oil spill.