Schwarzenegger, Battling Deficit, Tries Again to Revamp Budget

(Bloomberg) -- California Governor Arnold Schwarzenegger is trying for a third time to overhaul state spending as he grapples with a growing deficit and resistance from Democrats who want higher taxes to fill the gap.

The governor, delivering his annual State of the State Address yesterday, called for a constitutional amendment requiring California to set aside a portion of surplus revenue during flush years to stabilize the budget in lean times. He said he will propose a spending plan tomorrow that cuts most programs in the state to eliminate a $14 billion shortfall in the coming fiscal year.

Schwarzenegger, a former bodybuilding champion and Hollywood actor, was swept into office in 2003, in part on voter angst over how his predecessor Gray Davis managed the most populous U.S. state's perennial budget problems. The state's finances are hamstrung by mandatory spending increases and a boom-and-bust cycle of revenue tied to income taxes.

 

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U.S. Stocks Gain, Led by Technology, Health Care; Pfizer Rises

(Bloomberg) -- U.S. stocks gained after Hewlett- Packard Co. said it won't be hurt by an economic slowdown and Goldman Sachs Group Inc. told clients to buy drug companies.

Hewlett-Packard, the biggest personal computer maker, gained for the first time in nine days after its technology chief said sales of touch-screen products ``far exceeded'' company expectations. Johnson & Johnson, Pfizer Inc. and Merck & Co. rallied after Goldman analysts said some drugmakers will continue to grow earnings even as the economy slows.

 

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Bear Stearns's Cayne to give up CEO post: report

(Reuters) - Bear Stearns Cos Inc (BSC.N: Quote, Profile, Research) leader James Cayne will relinquish his title as chief executive, but remain chairman, the Wall Street Journal reported on Monday, citing people familiar with the matter.

Reached by phone at his residence in Manhattan, Cayne declined to comment.

"I can't talk. I'm on the other line," Cayne told Reuters.

The 74-year-old Cayne has been under fire since two Bear-run hedge funds collapsed last summer. The fifth-largest U.S. investment bank also lost money in the fourth quarter -- its first loss ever -- on bad bets on risky subprime mortgages.

Cayne has been the subject of unflattering articles about his time playing golf and bridge while the company's key fixed-income business stumbled amid a meltdown in the subprime mortgage industry. The company took a $1.9 billion write-down in the quarter that ended November 30, reflecting the reduced value of subprime mortgage-related securities. Its quarterly net loss was $854 million.

 

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Schultz back as Starbucks CEO

(Reuters) - Starbucks Corp (SBUX.O: Quote, Profile, Research) replaced CEO Jim Donald with founder and Chairman Howard Schultz and said it would slow an aggressive U.S. expansion in a shake-up that sent its battered shares up nearly 9 percent.

The move marks a return to daily management for Schultz, who is seen as the conscience of the company and warned executives a year ago that Starbucks was losing its way. Schultz, who was chief executive from 1987 to 2000, said Starbucks would close underperforming U.S. outlets and speed up international growth.

Investors have nearly halved the value of the world's biggest coffee chain to $13 billion in the last year in the midst of weakened U.S. sales growth.

"The most serious challenge we face is of our own doing," Schultz said on a conference call. "I am not going to use the economy, with you or our people, as an excuse."

 

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Wii trounces PS3, Xbox

(Fin24) - Nintendo's Wii outsold rival Sony's PlayStation 3 three-fold in Japan last year, helping the country's multi-billion dollar video game market to notch up its best ever year, a survey showed on Monday.

Nintendo sold about 3.63 million Wii consoles in its home market in 2007 while Sony sold 1.21 million PS3s, according to magazine publisher Enterbrain.

The Wii also trounced the PS3 more than three-fold in the key year-end sales period between November 25 and December 30, selling 774 123 Wii consoles against Sony's sales of 232 421 PS3s, the survey showed.

Nintendo won back its lead after the two rivals briefly traded places in November, when the PS3 outsold the Wii in Japan for the first time, helped by a price cut and a stronger line-up of games, according to Enterbrain.

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Oil drops further away from $100

(Fin24) - Oil prices eased further from the historic 100-dollar-a-barrel level on Monday on fears that energy demand in the United States could be hit by the weakness of the world's biggest economy, traders said.

 

New York's main contract, light sweet crude for delivery in February, fell 51c to $97.40/barrel in electronic deals.

It had struck a record high of $100.09 last Thursday.

On Monday, Brent North Sea crude for February eased 7c to $96.72/barrel. Last week it struck an historic peak of $98.50.

"Prices fall as weak economic data rekindle fears of recessions in the US," Barclays Capital analyst Kevin Norrish wrote in a note to clients.
 

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Europe Confidence Falls to Lowest in Almost Two Years

(Bloomberg) -- European economic confidence fell in December to the lowest in almost two years as orders weakened and soaring prices for food and energy pushed up inflation.

An index of executive and consumer sentiment in the euro area slipped to 104.7, the lowest since March 2006, from 104.8 in November, the European Commission in Brussels said today. A separate report showed producer-price inflation accelerated in November to the highest in almost a year.

Expansion in Europe's services and manufacturing industries is slowing and confidence is weakening after oil prices reached a record and the euro gained against the dollar. Still, the European Central Bank has held off cutting its key lending rate as inflation soars, threatening to fuel bigger pay demands.

 

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