US Stocks Higher After Positive Earnings Reports; More Countries Pledge to Build Up Global Firewall; Economist Doubts Recovery Will Repeat 2010, 2011 Backsliding
QUEST: "We are achieving industrial growth." That's a declaration from General Electric's chief, Jeffrey Immelt. GE's making a strong showing on Wall Street after its earnings did come in at the top end of the estimate. Alison Kosik is downtown. We're in midtown, Alison's downtown at the New York Stock Exchange. Good evening.</s>ALISON KOSIK, CNN CORRESPONDENT: And good evening to you, Richard. You know, it's not just earnings that are sort of keeping the market moving forward today. Also, that read on German business confidence, that came in stronger than expected. That really gave a good boost to stocks today. You mentioned GE, but let me get to McDonald's, first. McDonald's is interesting. It met profit forecasts, its earnings coming in line with estimates. Sales up 7.3 percent worldwide. But these sales were led by the US, Richard, which saw an almost 9 percent sales gain, and this is what's unusual compared to recent quarters. It's usually the international sales that outpace domestic, but Europe's struggles have sort of changed things around. All right. General Electric's earnings, as you said, beating forecasts. They had a really strong quarter with strong sales of big industrial products, like jet engines and electric turbines, actually profits from the industrial side of the biz for GE is up 10 percent from the same time a year ago. Richard?</s>QUEST: And if we take a look at the mood and, if you like, the sentiment, Alison, a very strong run up, a pull back on the market. But as we bounce around 13,000, there is that level of indecision that seems to be all pervasive at the moment.</s>KOSIK: That's so true. Even you look at the volume, and the volume continues to be light because you don't have that buying with conviction. And you don't have that buying with conviction because there's a lot of skepticism as to how the economic recovery is going. We're seeing how the jobs recovery is sort of losing momentum. The recovery, if any, in the housing market is definitely losing momentum if it had any in the first place. So, you're seeing these inconsistent economic signs in the US economy that it's not necessarily charging ahead. One bright spot, though, is earnings. Earnings are really the reason why you're seeing stocks continue to move forward at least for today, although it's been quite the bumpy week this week. You look at earnings overall so far for the first quarter. So far, they've been pretty upbeat. Of the 105 S&P; 500 companies that have reported, more than 80 percent had beat expectations. Ah, but of course, I know what you're going to say: we've still got about 400 companies to go. Richard?</s>QUEST: We have 400 companies to go, and that is why next week, you will be taking part with me in the Q 25 as we start to analyze those --</s>KOSIK: Ooh!</s>QUEST: -- the greens and the --</s>KOSIK: I can't wait!</s>QUEST: -- the reds. Oh, yes. Get yourself ready. Oh, well, you really must get out more --</s>KOSIK: I can't wait.</s>QUEST: -- if that gets you that excited.</s>QUEST: Alison Kosik at the New York Stock Exchange. Have a good weekend, Alison.</s>KOSIK: You, too.</s>QUEST: Pledges to the global firewall fund are pouring in. The finance chief of Brazil and Japan say the IMF could achieve its sum target of $400 billion. Britain, Australia, Singapore, South Korea, together have added another $41 billion. Talk about passing around the tin can or the tin pot. The chief at the IMF, Christine Lagarde, says the additional crisis commitments have pushed the current total to at least $357 billion. The IMF wants to have enough money to shore up the eurozone's most vulnerable economies. She says it's the -- eurozone is the epicenter of risk to the global economy. The IMF's watching the BRICs economies to see whether they'll contribute and by how much. And it's worth pointing out that the money that is being contributed is not loans. They are guarantees or they are commitments. So nobody's actually writing checks. They're probably just writing IOUs. The chief economist for the Americas at Natixis is Evariste Lefeuvre. He joins me in New York. Evariste, we look at the numbers this week that we got from the IMF, and we look at the firewall. Let's start with the firewall --</s>EVARISTE LEFEUVRE, CHIEF ECONOMIST FOR THE AMERICAS, NATIXIS NORTH AMERICA: Yes.</s>QUEST: -- if we may. As currently constituted, $500 billion, the IMF's got its $300, $400 billion. Are you satisfied that's enough?</s>LEFEUVRE: First, I would like to remind you that when the IMF is lending money, it's just drawing some money from the Central Bank. So, of course it's the pledge. So, it's true you don't have to put more than a commitment to help the IMF if things are going bad. After that, to answer precisely to your question, I think that if the purpose of this firewall is to bail out Spain or Italy, I think it's not enough. If, on the contrary, and what I do expect, this money can be added to the European stability mechanism to provide some cash to the banking system in Europe, that will be well enough. I think that all now will depend on the ability of countries to ask cash not for themselves but for their banking system. This is where the crisis we are now.</s>QUEST: We have spent so much time this week talking about he eurozone crisis, which is the epicenter, according to Lagarde, and which is the tail risk, according to the World Economic Outlook. But talk me through emerging markets and how the spillover of what's happening in Europe now becomes such a worry not only in the United States, where growth will be 2.5 percent or so this year, but in more -- more emerging economies.</s>LEFEUVRE: I think in emerging economies, we've seen some very interesting moves last week, actually. The Reserve Bank of India cut interest rates. Brazil, also, which is facing a very strong deceleration is also cutting rates and is also promising to cut more if need be. And I think that this is helping the sentiment of investors. We are definitely in a period of slowdown. It can be eased, of course, by Germany getting better, and it can be eased also by the fact that we should never compare it with last year, because last year was a huge shock on the global trade because of Japan.</s>QUEST: Right.</s>LEFEUVRE: And it's different. It's cyclical here.</s>QUEST: OK. Well, you say that. You say -- you say that it's cyclical --</s>LEFEUVRE: Of course.</s>QUEST: -- but what we could be seeing and what the "New York Times" says this morning on its front page is that 2012 could repeat 2010 and 2011, where you have a very promising Q1 that filters down into Q2, and by Q3 and Q4, we're all underwater.</s>LEFEUVRE: I totally agree with that, but I think it's wrong for several reasons. First of all, the reason I just mentioned before, we don't have an earthquake and a strong shock on global trade. Second, probably most important, last year, when you have a strong deceleration, especially in the US, you had before that a very sharp increase in oil prices. Remember, from $42.90, $100. Now, it's totally different. Prices are easing down. And the third point, which is also very important is, we've seen some decline in the economic momentum in the US, that's true, but the economy is much stronger. Even if we had some weak job creation last month, it's still -- we still have a strong economy. And I will add to the fact that the reason why the recovery is so bumpy is in the US because not of the fact that it's -- the reason it's so bumpy is because it's not a demand-led recovery. It's not credit, it's not bubble, but it's supply. It's the revolution in oil, it's the rebirth of manufacturing. That's why it's going to be bumpy. But it's a healthy economy for sure.</s>QUEST: If we are not seeing good growth now with this -- to use the phrase, very or highly accommodative monetary policy, basically rock-bottom interest rates, LTROs, quantitative easing, and we are still bouncing about the bottom, how can you say this is cyclical?</s>LEFEUVRE: The problem of the LTRO, that is the ECB in Europe providing cash to banks, is to deal with liquidity. It's totally different from what the Fed is doing. The Fed is trying to support the economy using some quantitative easing. And now, the nature of quantitative easing has changed, and I think that the Fed is willing, really, to go further. But the only thing they are going to do is increase the balance sheets, but just focus, focus on the long end of the curve, trying to put weights on the downside. Personally, I think that this will be used less because now the problem with the housing sector -- this week, we've seen that the housing sector is still weak in the US. It's not to match the possibility of households to re- -- change, to re-assess and refinance their mortgage. It's more about writing off the debt of people with negative liquidity in their home. But they will probably do it, but I think QE3 or whatever you call it will be a bad idea in the</s>US.  QUEST: Evariste, have a good weekend and --</s>LEFEUVRE: You, too.</s>QUEST: -- thank you for putting such spirited views on the economy. Always good to talk to you on the program, QUEST MEANS BUSINESS, live from New York. Now, the UK's Royal Mint is defending its move to remove copper from 5 and 10 pence coins. Good grief, whatever next? Are they not real? These new nickel-plated steel coins will save $13 million a year, though there's controversy about their safety. Two dermatologists have written to the "British Medical Journal," the BMJ, warning that the coins are more likely to cause allergic reactions. Give me enough of them, we'll try it out. They point out that nickel-plated coins were withdrawn in Sweden for an acceptable risks to health. The Mint tells us the new coins have no additional risks and are already in use in New Zealand and Canada. Now, while we're on the subject of loose change, today's Currency Conundrum. According to the Canadian Budget Office, how much in Canadian cents does a Canadian penny cost to produce? Is it 0.4 cents, 0.8 cents, or 1.6 cents? In other words, one penny costs how much to make? Those are -- that's the Conundrum. Now, the rates to the break. A quick look at the foreign exchange. Sterling has jumped to a near six-month high against the dollar, 1.61. The euro is also making gains. There's little change with Japan's currency. A dollar buys 81.5 yen. The rates, now the break.