World financial news

Conflicts over exchange rate policy and other economic strategies are surfacing at a Group of 20 financial seminar in Nanjing, China, despite Beijing’s insistence that its own currency regime is not on the agenda.

U.S. Treasury Secretary Timothy Geithner told a panel at the G-20 meeting that easing controls on exchange rates and shifting to more market oriented policies are key steps toward managing inflation paydayloans.

A copy of the remarks, which appear directed at China’s currency controls, was provided to journalists.

Beijing meanwhile has signaled its own frustrations with U.S. stimulus policies, which the Chinese say are fanning surges in commodity prices.

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British foreign secretary William Hague says that diplomats meeting in London did not discuss arming the opposition to Libya’s Moammar Gadhafi.

Hague said Tuesday that the subject of arming rebels did not come up as officials from up to 40 countries met to discuss the north African nation’s future.

He added that Libya was under a United Nations-mandated arms embargo and that the restrictions “in our view apply to the whole of Libya.”

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

LONDON (AP) _ Britain’s Foreign Secretary William Hague says diplomats meeting on Libya have agreed to consider more sanctions on Moammar Gadhafi’s regime.

Hague said Tuesday that diplomats are considering more sanctions on “individuals and entities associated with the regime” to send a clear message to Gadhafi that he cannot attack civilians with impunity.

He says the possible sanctions will be pursued in the United Nations and regional organizations. He did not provide details on what kind of sanctions may be pursued.

Britain, Germany, U.S. and Switzerland have already moved to freeze assets belonging to Gadhafi and the Libyan government.

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The leader of Portugal’s main opposition party says the minority government’s downfall is “inevitable” after it failed to win political support for its latest plan to cut the country’s huge debt burden.

Portugal is trying to avoid becoming the latest of the 17 eurozone countries to need a bailout, following financial aid for Greece and Ireland last year.

But all opposition parties have balked at the Socialist government’s new austerity measures, which are expected to be rejected by Parliament even though European leaders praised them.

Pedro Passos Coelho, leader of the main opposition Social Democratic Party, said late Monday that the political deadlock made an early election unavoidable.

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Sales of U.S. previously owned homes probably dropped in February to a three-month low, indicating a sustained housing market recovery has yet to develop, economists said before a report today.

Purchases decreased 4.7 percent last month to a 5.11 million annual rate, according to the median forecast of 60 economists surveyed by Bloomberg News. Sales in January rose to the highest in eight months as investors used all-cash transactions to buy distressed properties.

Foreclosures are adding to the glut of distressed properties and pressuring prices, leaving some Americans with bigger mortgages than their homes are worth as joblessness hovers near 9 percent. The figures underscore the Federal Reserve’s view that the housing market “continues to be depressed” even as the rest of the economy improves.

The labor market is “improving but not rapidly enough to fuel a sharper rebound in the housing sector,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “You’re still seeing prices drifting lower, which is a big problem.” Existing-home sales are being “inflated by the amount of short sales and foreclosure sales going on,” he said.

The National Association of Realtors’ data are due at 10 a.m. in Washington. Economists’ estimates ranged from 4.8 million to 5.3 million following January’s 5.36 million pace.

Housing, the industry that precipitated the recent recession, is having trouble gaining strength after the government’s homebuyer tax credit expired and caused sales to plunge to a 3.86 million rate in July.

Housing ‘Depressed’

Fed officials, in their statement following their March 15 monetary policy meeting, said that while the “economic recovery is on a firmer footing,” residential real estate is still “depressed.”

“Many potential home buyers are finding mortgages difficult to obtain and are also worried about additional declines in house prices,” Fed Chairman Ben S. Bernanke told lawmakers during March 2 testimony. “There’s no demand for construction to build houses” until more people want homes, he said.

Home prices dropped in the 12 months to December by the most in a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 2.4 percent, the biggest year- over-year decrease since December 2009, the group said Feb. 22.

In addition to an unemployment rate lingering near 9 percent, some underlying home values are less than the mortgages. That indicates foreclosure filings may climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac said earlier this year.

Home Builders

Cheaper homes and distressed properties are making it difficult for homebuilders as well. Housing starts fell in February to the slowest pace since April 2009 and building permits slumped to a record low, Commerce Department figures showed March 16.

Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders has declined 9.7 percent in the 12 months ended March 18, compared with a 9.7 percent increase for the broader S&P 500 Index.

For housing, employment “is the most important part today or biggest impediment,” said Larry T. Nicholson, chief executive officer of Ryland Group Inc business cards. (RYL), a Calabasas, California- based homebuilder catering to first-time buyers.

Whether potential buyers “have a job and they’re going to keep their job or whether their hopes of employment are out there is still the biggest challenge for us today,” Nicholson said at an investor conference March 8 in Orlando, Florida.

Recent Data

The NAR’s sales tallies in recent years may have been overstated because the consolidation of listing services could have led to data distortions, Lawrence Yun, chief economist at the Realtors’ association, told reporters after last month’s release.

Yun said the agents’ group is hoping to issue its benchmark revisions by the middle of the year. The updates are usually based on census questions relating to homeownership that weren’t included in last year’s decennial population count. He said the group’s figures over the past few years may be showing a slight “upward drift” that will be corrected with the new data.

Bloomberg Survey ============================================ Exist Exist Homes Homes Mlns MOM% ============================================ Date of Release 03/21 03/21 Observation Period Feb. Feb. ——————————————– Median 5.11 -4.7% Average 5.11 -4.7% High Forecast 5.30 -1.1% Low Forecast 4.80 -10.5% Number of Participants 60 60 Previous 5.36 2.7% ——————————————– 4CAST Ltd. 5.00 -6.7% ABN Amro Inc. 5.20 -3.0% Action Economics 5.10 -4.9% Aletti Gestielle SGR 5.30 -1.1% Ameriprise Financial Inc 5.15 -3.9% Bank of Tokyo- Mitsubishi 5.30 -1.1% Bantleon Bank AG 5.05 -5.8% Barclays Capital 5.20 -3.0% BMO Capital Markets 5.10 -4.9% BNP Paribas 5.00 -6.7% BofA Merrill Lynch Resear 5.00 -6.7% Briefing.com 4.80 -10.5% Capital Economics 5.10 -4.9% CIBC World Markets 5.20 -3.0% Citi 5.10 -4.9% ClearView Economics 5.20 -3.0% Commerzbank AG 5.00 -6.7% Credit Agricole CIB 5.10 -4.9% Credit Suisse 5.15 -3.9% DekaBank 5.10 -4.9% Desjardins Group 5.00 -6.7% Deutsche Bank Securities 5.30 -1.1% DZ Bank 5.00 -6.7% Fact & Opinion Economics 5.25 -2.1% First Trust Advisors 5.21 -2.8% HSBC Markets 5.20 -3.0% Hugh Johnson Advisors 5.20 -3.0% IDEAglobal 5.20 -3.0% IHS Global Insight 5.00 -6.7% Informa Global Markets 5.05 -5.8% ING Financial Markets 5.05 -5.8% Insight Economics 5.00 -6.7% Intesa-SanPaulo 5.00 -6.7% J.P. Morgan Chase 5.15 -3.9% Janney Montgomery Scott L 5.15 -3.9% Jefferies & Co. 5.10 -4.9% Maria Fiorini Ramirez Inc 5.15 -3.9% MET Capital Advisors 5.22 -2.6% Moody’s Analytics 5.09 -5.0% Morgan Stanley & Co. 5.15 -3.9% National Bank Financial 5.20 -3.0% Natixis 5.20 -3.0% Nomura Securities Intl. 5.23 -2.4% Parthenon Group 4.96 -7.5% Pierpont Securities LLC 5.00 -6.7% PineBridge Investments 4.91 -8.5% PNC Bank 5.15 -3.9% Raymond James 5.15 -3.9% RBC Capital Markets 5.00 -6.7% RBS Securities Inc. 5.20 -3.0% Scotia Capital 5.15 -4.0% State Street Global Marke 5.09 -5.0% Stone & McCarthy Research 5.10 -4.9% TD Securities 5.15 -3.9% Thomson Reuters/IFR 5.15 -3.9% University of Maryland 4.99 -7.0% Wells Fargo & Co. 5.00 -6.7% WestLB AG 5.12 -4.5% Westpac Banking Co. 4.93 -8.0% Wrightson ICAP 5.15 -3.9% ===========================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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China ordered banks to set aside more cash for the third time this year, judging that inflation remains a bigger threat to the world’s second-largest economy than Japan’s earthquake and nuclear crisis.

Reserve requirements will increase half a percentage point from March 25, the People’s Bank of China said on its website yesterday. The ratio will rise to 20 percent for the nation’s biggest banks, excluding any extra limits for individual lenders.

Premier Wen Jiabao has set taming inflation as the nation’s top economic priority this year, citing “exorbitant” house- price increases and risks to social stability. China followed India, which raised interest rates the previous day, in tightening monetary policy even after Japan’s crisis roiled global stock markets and threatened to disrupt supply chains across Asia.

The move “is another sign that the tragic events in Japan are unlikely to have a significant impact on policy decisions elsewhere in Asia,” said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong. “Uncomfortably strong inflation throughout the region suggests that more policy action is required.”

Crude oil pared gains and copper fell after the announcement. The move may lock up about 350 billion yuan ($53 billion), according to Australia & New Zealand Banking Group.

Reining in Credit

An interest-rate increase for China is “a couple of weeks away,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. He said the reserve-ratio increase was to soak up money as central-bank bills matured. Shen estimated that annual inflation may accelerate to 6 percent this month, the fastest pace since July 2008.

The benchmark one-year lending rate stands at 6.06 percent after three increases since mid-October. The government is aiming to rein in credit growth after a record 17.5 trillion yuan ($2.7 trillion) of lending over 2009 and 2010.

“This is clear evidence that the tightening agenda is still alive in China and signals that when nerves have settled, we will get more interest rate hikes,” said Stephen Green, a Shanghai-based economist for Standard Chartered Plc.

Zhou Xiaochuan, the governor of the People’s Bank of China, said this month that rates will be used to curb inflation, and played down the role of currency gains, which U.S. officials have encouraged China to use as a tool.

Consumer prices rose at an annual 4.9 percent pace in February and output increased 14 percent in the first two months of 2011, according to the statistics bureau. Producer prices jumped 7.2 percent last month, the most since September 2008.

Inflation has topped the government’s 4 percent target for this year for each of the past five months.

–Zheng Lifei, with assistance from Sophie Leung. Editors: Paul Panckhurst, Stephanie Phang.

To contact Bloomberg News staff for this story: Lifei Zheng in Beijing at +86-10-6649-7560 or lzheng32@bloomberg.net

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It’s the eternal Latin American lament: The region’s superpower neighbor either ignores it or pushes it around.

Fair or not, that perception will hang over President Barack Obama’s first official visit to South America, which starts Saturday in Brazil and stops in Chile and El Salvador.

Each new U.S. president brings renewed expectations of closer ties to Latin America, and few leaders stoked those hopes more than Obama. Just three months after taking office, he told fellow leaders at a Summit of the Americas that a new era of cooperation was dawning.

“I know that promises of partnership have gone unfulfilled in the past,” Obama said.

“We have at times been disengaged, and at times we sought to dictate our terms. But I pledge to you that we seek an equal partnership,” he added. “I’m here to launch a new chapter of engagement that will be sustained throughout my administration.”

Latin Americans have been frustrated by the way the Sept. 11 attacks jerked U.S. attention away from their region after President George W. Bush, too, had promised a new focus to Latin America.

Yet two years after Obama’s speech, Latin America is still waiting for action to back the words, and for a new U.S. approach that will help dispel memories of military interventions, support for Cold War-era dictatorships and demands for austere economic policies.

“That speech created high expectations, and he has not delivered,” said Mauricio Cardenas, director of the Latin America Initiative at the Brookings Institution in Washington. “People understand it’s because of Afghanistan and Iran, the economy and everything that has happened in the meantime, but, still, he hasn’t delivered.”

Obama’s trip likely will be long on symbolism and short on achievements.

His two-day visit to Brazil will focus on business. Corporate leaders accompanying the president will seek more investments in the region’s largest economy and in infrastructure for the 2014 World Cup and the 2016 Olympics.

Brazil itself wants more access to the U.S. market for its agricultural goods. It has repeatedly accused the U.S. of protectionist policies and unfair farm subsidies.

But Obama’s hands are tied, at least in the short term. The U.S. Congress, however, is unlikely to cut agricultural subsidies and the current farm bill does not expire until 2012.

Brazil also is seeking U.S. support for a permanent seat on the U.N. Security Council based on its growing clout on the global stage. While Obama has endorsed a similar bid by India, there is little sign that he is unlikely to promote Brazil’s yet.

U.S. Secretary of State Hillary Clinton said last month that she expected “a constructive dialogue with Brazil on this issue during President Obama’s trip and going forward.”

David Fleischer, a political scientist at the University of Brasilia, noted that Brazil’s bid was hurt when the country voted against a new round of U.S.-backed sanctions on Iran in the Security Council last year.

Michael Shifter, president of the Inter-American Dialogue, said the symbolic gestures of Obama’s tour are vital to future progress on economic and political matters.

That is the case with Brazilian President Dilma Rousseff, who three months into her presidency has expressed a desire to deepen ties with the U.S. that were strained in recent years under her predecessor, Luiz Inacio Lula da Silva.

Rousseff has criticized the human rights record of Iran, a nation Silva warmly embraced, and is backing away from Silva’s attempts to mediate the nuclear standoff between Iran and the West. Her foreign minister, Antonio Patriota, was ambassador to the U.S. from 2007-2009. Rousseff is also not showing Silva’s enthusiasm for buying the French-made Dassault fighter jet, giving U.S.-based Boeing Corp. renewed hope of winning a $5 billion contract with its F-18 Super Hornet.

“The main goal of Obama’s trip is to get back on track U.S. and Brazilian relations, which have arguably been the biggest disappointment of Obama’s Latin American policy,” Shifter said.

In Chile, Obama is expected to deliver a speech that Clinton has said will “articulate the importance of Latin America to the United States.”

Chile’s Foreign Minister Alfredo Moreno called Obama’s visit “a significant signal to Chile and the whole region.”

Chile is one of the United States’ closest allies in South America, and even a string of leftist presidents strongly embraced U.S.-style capitalism since the end of former dictator Augusto Pinochet’s regime in 1990. The two nations signed a free trade agreement in 2003.

Chile’s Presidential spokeswoman Ena von Baer told reporters that Obama’s visit will include signing of an accord that could include U.S. training for Chilean nuclear engineers. Despite the nuclear disaster facing Japan, Chilean President Sebastian Pinera says his energy-hungry nation needs the option of nuclear power.

The Chileans are also expected to push for admitting their citizens into the U.S. visa waiver program.

Obama will visit El Salvador at its most violent moment since the civil war of the 1980s. Cocaine seizures are rapidly rising and the murder rate is climbing, in part due to a rise in local drug dealing.

Central America was allotted $165 million for the $1.8 billion Merida Initiative to fight drugs in Mexico, and the U.S. Congress last year created a separate Central America Regional Security Initiative with a total of $248 million to date.

Local leaders say that’s still not enough to battle powerful cartels financed by the U.S. drug market, and expanded security aid is likely to be a topic during Obama’s visit.

Shifter said the U.S. likely sees El Salvador as its best partner in combatting the poverty and violence in Central America, and Salvadoran President Mauricio Funes told business leaders this week that his nation is “recognized for its leadership and desire for integration” in the area’s fight against poverty and crime.

“The government of President Obama has a special interest in establishing with El Salvador an alliance for growth,” Funes said, without offering details.

Evan Ellis, an expert on Latin America at the National Defense University, said Obama’s administration, like so many before it, has been forced to put the region on the back burner because of crises elsewhere.

“Latin America has long suffered the neglected-wife syndrome, where the husband, the U.S., comes back and says, ‘I’ve been a bad partner but things are going to change,’” said Ellis. “That lasts a couple of days, and then the cycle begins anew.”

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Allan Martinson, managing partner of Estonian private equity company MTVP, saw Baltic companies he invested in cut spending as much as 30 percent starting in 2008 to cope with Europe’s worst recession.

They all survived, even as their earnings plunged in part because of government austerity measures. Now that Estonia, Latvia and Lithuania are growing, Martinson is putting money into such startups as Estonian online dating site Flirtic.

The Baltics’ ability to tolerate economic pain has been praised in recent months by German Chancellor Angela Merkel and Klaus Regling, chief of the European Financial Stability Facility. Latvia’s gross domestic product fell 18 percent in 2009 and Estonia’s fell 14 percent. That’s what it will take to get Greece, Portugal, Ireland and Spain through their current crisis, Martinson says.

“I would be very surprised if the southern European countries would be able to go through with necessary measures on their own,” Martinson, 44, said in a phone interview in Tallinn. “I think it will take very strong coercion to get them to do that. Perhaps Europe needs financial police.”

He has been investing in the Baltic region since the countries emerged from the collapse of the Soviet Union in the early 1990s, when a computer cost seven times his monthly wage.

After suffering through the worst drop in economic output in the world, the Baltic countries have been growing on a quarterly basis since the beginning of 2010. Estonian stocks were the world’s third-best performers last year.

Rising Ratings

Latvia’s credit rating was raised to the lowest investment grade from junk status by Fitch Ratings yesterday; the country also has investment-grade ratings from Moody’s Investor’s Service. Standard & Poor’s rates Latvia BB+, its highest speculative grade, with a positive outlook.

Credit default swaps, which investors use to protect against default or speculate on creditworthiness, in the three countries are below those for Greece, Ireland, and Portugal. Greece is only slightly less risky than Pakistan while Estonia is ranked almost as safe as France, according to CDS prices.

Lithuania’s Apranga AB, the biggest Baltic clothing retailer, returned to profit last year and now plans to open as many as eight new shops this year. The company had cut its workforce by 16 percent in 2009 and trimmed wages by 30 percent to cope with tumbling consumer spending. Shares rose 160 percent last year.

Estonia, which adopted the euro in January, saw its OMX Tallinn Index rise 72.6 percent last year. Latvia and Lithuania were among the top 10 performers. Greek stocks fell 41 percent.

Political Favor

What’s more, political leaders in the three countries have found support from the electorate. Estonian Prime Minister Andrus Ansip widened his government coalition’s majority in elections held on March 6. Latvians in October re-elected Prime Minister Valdis Dombrovskis, while Lithuanian Premier Andrius Kubilius’s governing party garnered twice as many votes as polls predicted in municipal elections on Feb. 27.

Estonia mastered the economic crisis “in an admirable way,” Merkel said in a Berlin news conference with Ansip on Oct. 21. “It’s a good, even remarkable signal that Estonia fully met the criteria for joining the euro during such difficult economic times.”

Greece, which turned to a group led by the EU and the IMF for a 110-billion euro ($152 billion) bailout in May last year, had its credit rating cut three steps to Ba1 by Moody’s Investors Service on March 7.

Street Protests

Greeks took to the streets with 496 protests and marches last year, according to police, as the government passed tax increases and budget cuts to meet the terms of its loan. Three people were killed in a fire during riots in Athens in May.

And Moody’s cut Spain’s rating to Aa2 on March 10, saying the cost of shoring up the banking industry will eclipse government estimates.

Ireland’s austerity program, bank bailout and international loan led to an election win for the opposition last month, the biggest political shift in the country’s history short term personal loan. The previous government lost support by turning to the IMF and euro countries for an 85-billion euro rescue package in November.

To be sure, it wasn’t all stoicism in the Baltics. A peaceful protest of about 10,000 people on Jan. 13, 2009, turned violent as a few hundred people rioted in the old city of Riga. The Latvian government collapsed about a month later.

Then Lithuanians rioted, about a month after Kubilius took power in general elections and after the government announced tax increases and spending cuts.

Euro Discipline

In both regions, currency devaluation, the traditional path to exports and growth, is not an option. The southern European countries are in the euro, as is Estonia, and Latvia and Lithuania aim to join by 2014 and thus have to limit exchange fluctuation.

A key difference, though, may lie in the recent history of the Baltics, said Hardo Pajula, an economist with SEB AB in Tallinn. Latvia, Lithuania and Estonia, occupied by the Soviet Union for almost 50 years, lived through its collapse. The last few years before independence in 1991 brought hyperinflation, food and fuel shortages and a wipeout of savings.

“It is rather hard to envisage a pampered citizen of a mature Western welfare state accepting the pay cuts that were pushed through in this part of the woods in the last couple of years,” Pajula said. “A great fuss has been made about the Baltic GDPs having fallen by 16 percent or 17 percent in 2009, but you have to see these things in context. Aggregate output fell perhaps by 70 percent at the beginning of the 1990s.”

Food Coupons

Shortages were so severe that coupons for staples like food and soap and alcohol had to be used. Inflation reached about 1,000 percent in the region in 1992 and savings were wiped out.

EU membership in 2004 led to a fall in interest rates, a boom in lending and rising housing prices and wages. Then the global credit crisis hit just as the regional expansion was running out of steam.

Latvia has implemented austerity measures equal to about 16 percent of GDP since the end of 2008, when it turned to a group led by the EU and the International Monetary Fund for a 7.5 billion-euro loan. Estonia passed measures equal to 9 percent of GDP; Lithuania’s budget discipline totaled 12 percent of GDP in a plan the IMF called “unprecedented by historical and international standards.”

Over Years

While the Greek package agreed to last year calls for budget cuts worth 14 percent of GDP, it will take place over four years. Spain is enacting austerity worth 8.2 percent of GDP between 2009 and 2013.

To be sure, the deal struck by euro-area leaders last weekend to create a permanent safety net for indebted countries starting in 2013 and lower interest costs for Greece boosted the chances they will survive the debt crisis.

Only Greece and Ireland have had to seek aid; Portugal says no bailout is needed and Spain is moving ahead to rescue its banks without emergency aid. The country’s Ibex 35 Index is up 6.2 percent and Greece’s ASE Index up 18 percent this year, while the Stoxx Europe 600 Index is down 0.8 percent.

Greece’s public debt, though, was 140 percent of GDP and its budget deficit 9.6 percent last year, the European Commission said.

Estonia’s measures helped keep its public debt at the EU’s lowest level, 8 percent of GDP. The budget deficit declined to 1 percent of GDP. Exports of goods rose 35 percent last year to a record after declining 23 percent in 2009.

To Martinson, the same future could await Europe’s heavily indebted countries if they take the needed measures.

“With or without a European financial police, southern Europe will have to go through with own austerity program anyway,” he said. “It is just a matter of time.”

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The new iPads have landed — and the throngs turned out to greet them.

Apple maintained an air of mystery about its South by Southwest (SXSW) pop-up shop until the very last minute, waiting until barely an hour before launch time to unveil its logo and transform an anonymous, empty corner store in downtown Austin into the epicenter of iPad 2 mania. By then, the line of waiting shoppers stretched for blocks, tipped off by an article in a local newspaper late Wednesday that revealed Apple’s plans.

Shopper No. 1, Austin local Sweet John Muehlbauer, turned out at 6:30 a.m. to secure his spot at the head of the line. Right behind was a contingent that traveled much further: Four South Africans, who capped off a 35-hour plane trip to SXSW with a nine-hour wait in the iPad line. It was a spur-of-the-moment decision to queue up, but the group made the most of its wait.

"I’m going to get two for myself," declared Graham Bradford, founder of Cape Town-based Web development firm Graydot. "One as a backup. Or I might give one to my future girlfriend. I don’t know who that is yet, but having an iPad 2 should help, right?"

Fifteen minutes before launch time, a squad of Apple employees emerged from the shop — still covered with opaque paper concealing the view inside — and began writing out purchase tickets. Most of those waiting rattled off their requests like a fast-food order: "Two 32 gig white Wi-Fis, one 16 gig Verizon 3G in black …"

But a few customers wanted to drill down into the specs. Tim Street, in from Los Angeles, spent 10 minutes grilling an Apple staffer about prices, data plan options and storage capacity before making his decision: a black 64 GB Wi-Fi iPad and an AT&T 3G 64 GB model, also in black.

The decision took longer than the purchase. At 5:08 p.m., Street emerged from the shop, victoriously waving his iPads aloft. He plans to keep one and share the other around the office at MDialog, a mobile video software developer.

Apple didn’t take pre-orders for the iPad 2, forcing those who wanted to get one right away to hop on line. At the company’s New York City flagship, hundreds turned out. The first half-dozen lined up 24 hours in advance, braving a drizzle and chilly temperatures.

Piper Jaffray analyst Gene Munster says his team counted 1,190 people in line at the shop at 5 p.m. That outnumbered the 730 people in line at launch time for the first iPad in April 2010.

In Austin — where the SXSW Interactive show opened Friday morning, drawing more than 10,000 people to the city — the weather was balmy and the line atmosphere party-like. Many of those waiting already had the first version of the iPad, released less than a year ago, but were eager to trade up to the faster and thinner new model.

But a few were crossing enemy lines. One of the earliest spots in line was held by a shopper wearing an Android t-shirt. Aaron — "I’m not going to give you my last name," he said — had no interest in Apple’s latest gizmo. "I run Android businesses. No way I’m using one," he said.

His plan: Resell the iPads for a $200 markup. He already had one buyer lined up.

Others had no intention of letting their new prize out of their hands. Surrounded by cheering crowds, a media swarm, and a line stretching for blocks, the iPad 2 launch had the air of a historic — or religious — occasion.

IPad D.J. Rana Sobhany lined up to snag two iPads that she plans to press into immediate service for musical sets Friday night.

"Apple has really been pushing the music capabilities of the iPad a lot," she said. This time around, Apple built a lot of native functionality for musical experimentation right into the device: "That really does change everything."

"The poor guys in there are shaking," Graham Bradford reported, emerging from the shop clutching a pair of iPads. "I’m shaking. I’m the first South African to have an iPad!"

-CNNMoney staff reporter Laurie Segall and Fortune writer Philip Elmer-DeWitt contributed to this report. 

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BP PLC’s partners in Russian joint venture TNK-BP rejected a proposal by the British oil company on Saturday regarding its disputed tie-up with OAO Rosneft, Russia’s top crude producer.

BP said the consortium of Russian billionaire shareholders did not accept an offer to involve them in talks about the Rosneft deal at a TNK-BP board meeting in Paris.

“A proposal by BP’s nominated directors, which would have allowed TNK-BP to hold initial discussions with Rosneft about pursuing the Arctic opportunity, was rejected by Alfa, Access and Renova (AAR),” BP said in a statement.

The AAR consortium, which has four representatives on the TNK-BP board _ alongside four BP-nominated directors and three independent directors _ has argued that BP’s proposed $8 billion share swap deal with Rosneft violates the TNK-BP shareholders’ agreement and would erode the joint venture’s competitive advantage.

AAR last month won a High Court injunction in London that has put the deal on ice until the dispute is resolved. The two sides underwent court-ordered arbitration this week and a ruling is expected by the end of the month.

The increasingly acrimonious dispute is giving BP a major headache as it tries to regroup and move on from the disastrous Gulf of Mexico oil spill. The Rosneft deal to explore the Arctic seabed would allow BP to hedge its production options as it faces new restrictions in the United States.

BP said Saturday that it “remains committed to finding a reasonable businesslike resolution to the matters raised by AAR… This will be through arbitration and direct talks with all parties involved.”

The London-based company added that it “continues to act constructively and reasonably.”

Rosneft was more blunt in a warning statement issued ahead of the board meeting, saying it never considered TNK-BP as a possible participant in its alliance with BP “due to its lack of the relevant competence and TNK-BP never made any proposals to Rosneft expressing its interest in working on the shelf.”

“Any activities aimed at disrupting the deal that cause damage to Rosneft will be closely examined,” it added. “Based on such examination, Rosneft will undertake all measures to defend the rights of its shareholders, with all the resulting consequences.”

Saturday’s extraordinary board meeting in Paris, called by AAR, was the third board meeting to be called on the dispute after the first two failed to find a resolution.

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Jean-Claude Trichet is bypassing the European Central Bank’s little-known secondary mandate as inflation propels policy makers toward the first interest-rate increase in three years.

While the ECB president signaled on March 3 that he may have no choice other than to tighten monetary policy, the bank’s statutes hand officials leeway to pursue policies supporting economic growth. The Maastricht Treaty says the central bank can keep rates low if policy makers judge that price stability is guaranteed. The ECB itself forecasts inflation will slow below its 2 percent ceiling next year.

“The markets didn’t expect such a shift to the primary mandate so soon,” said Jens Sondergaard, senior European economist at Nomura International Plc in London. “The ECB’s balancing act is especially tricky, with inflation risks crystallizing and the flare-up in the sovereign debt crisis.”

With inflation currently at 2.4 percent, unemployment at 9.9 percent and yields on Irish, Greek and Portuguese bonds close to records, Trichet last week had a choice: Keep his inflation fight limited to rhetoric or declare it was time to raise rates.

Trichet opted to say that the ECB will probably raise its benchmark from 1 percent in April, saying “strong vigilance” is needed. Bundesbank President Axel Weber on March 8 said the move may be the first in a series of increases.

ECB Flexibility

“Everybody underappreciated how significant the rise in inflation expectations was for the ECB,” said Julian Callow, chief European economist at Barclays Capital in London. “It’s surprising all around that they did move in this way.”

The ECB’s primary inflation mandate, which it interprets as keeping inflation just below 2 percent in the medium term, is enshrined in 1991’s Maastricht accord. Once this is achieved, the rulebook also allows it to “support the general economic policies” aimed at delivering high growth, social protection and economic convergence.

That’s a contrast to the U.S. Federal Reserve, whose officials are mandated to balance low inflation with high employment. The ECB’s preferences for monitoring inflation are a throwback to the era when the Bundesbank set monetary policy for Germany, the euro-area’s largest economy.

“The market tends to underestimate the determination of the ECB on inflation, period,” said Holger Schmieding, chief economist at Joh Berenberg Gossler &Co. in London. “By history and mandate it is much more focused on inflation” than other central banks such as the Fed, he said.

Inflation Mandate

Trichet told reporters last week that price stability is the bank’s “primary” mandate. That follows 10 months buying government bonds to shore up the region’s most indebted countries and repeatedly delaying the withdrawal of unlimited liquidity for banks.

As of a week ago, just four of 38 economists surveyed by Bloomberg News anticipated the ECB would raise its benchmark in the first half of this year. The majority mistook the ECB’s priorities, said Natascha Gewaltig, director of European economics at Action Economics in London and one of the four in the minority.

“People get into a mindset that’s difficult to get out of, but if you’ve actually been listening to the ECB it’s been getting clearer that they were nearing a rate hike,” said Gewaltig fast payday loan. “Overall euro-zone inflation and growth rates just don’t justify a 1 percent rate.”

ECB Concern

The ECB’s concern is that above-target inflation will generate a push from workers and companies for higher wages and prices, leading to faster so-called core inflation which tends to be more long-lasting than that driven by fuel or food price shocks. While the ECB’s forecasts show that officials expect inflation of just 1.7 percent in 2012, that’s still up from a previous estimate of around 1.5 percent.

Germany’s economy is also keeping up momentum after growing last year at the fastest pace in two decades. Unemployment plunged in February by three times as much as economists forecast and retail sales rose for a second month in January, data showed last week. The country accounts for about a third of the euro area’s gross domestic product.

Another reason for tighter credit is to “increase pressure” on governments to tackle the debt crisis amid concern that their failure to cut budget deficits and toughen fiscal policy rules threaten to fan inflation pressures, said Juergen Michels, an economist at Citigroup Inc. in London.

Trichet Boast

While Trichet often boasts that inflation has averaged about 1.9 percent since the euro began trading, the ECB has sometimes been willing to turn a blind eye to short-term breaches of its price target to help growth. Officials waited 10 months before responding to an overshoot of their goal with a rate increase in December 2005.

The ECB’s latest shift is not without risks. Geoffrey Yu, a foreign exchange strategist at UBS AG, says investors are drawing parallels with July 2008, when officials raised the key rate to a record high of 4.25 percent to tame the fastest inflation in 16 years. Subsequent data showed the economy was shrinking at the time and the ECB reversed the move three months later following the collapse of Lehman Brothers Holdings Inc.

“Tightening was too early and widely perceived as policy error,” said Yu of 2008. Trichet disagrees, arguing that by acting it enforced the ECB’s inflation-fighting credibility and gave it more room to fight the credit crisis.

Risk of Error

The risk of policy error may make the ECB cautious about how far it goes beyond April. Trichet says any increase may not be the start of a series. Economists at JPMorgan Chase & Co., Nomura and Morgan Stanley all predict the ECB will end the year with its benchmark at 1.75 percent.

Trichet could also take a last-minute decision not to follow the demands of the primary mandate if EU leaders this month fail to staunch renewed concerns about the euro region’s debt crisis. Heads of government meet in Brussels today for the first of two summits this month aimed at ending the crisis and creating a new rulebook for the region.

“In practice, the ECB will only really be in a position to consider raising rates in April or May if conditions to some degree normalize after the March 24-25 meeting,” said David Owen, chief European economist at Jefferies International Ltd. “By their actions, the ECB has certainly put more pressure on the politicians to come up with a big bang solution.”

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