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US Treasury Bond prices rise on weaker economic data

Treasurys prices rise on weaker economic data
May 26, 2011, 4:21 p.m. EDT
Associated Press

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NEW YORK (AP) — Investors sent government bond prices higher Thursday after reports on unemployment claims and first-quarter economic growth reinforced expectations that the economic recovery may be moderating.

The price of the 10-year Treasury note rose 62.5 cents per $100 invested in late trading. Its yield, which moves in the opposite direction to the price, fell to 3.06 percent from 3.13 percent late Wednesday.

It was the lowest level for the 10-year yield in a year. The yield is used as benchmark on a wide variety of loans for businesses and consumers including home mortgages.

The government reported that more people applied for unemployment benefits last week, the first increase in three weeks. Analysts had expected a drop.

The government also said that the U.S. economy grew at a relatively sluggish rate of 1.8 percent in the January-March quarter, due partly to a spike in gas prices above $4 a gallon. Economists had forecast an upward revision to 2.2 percent.

Traders tend to buy Treasurys when economic growth appears to be losing momentum.

The Treasury Department also auctioned off $29 billion in seven-year notes at a yield of 2.43 percent, the lowest yield of the year. Investors placed bids for 3.24 times the amount offered, higher than the previous four auctions this year.

The yield of the seven-year note was 2.36 percent late Thursday.

In other trading, the price of the 30-year bond rose $1.03 per $100 invested, while its yield fell to 4.22 percent from 4.27 percent late Wednesday. The yield on the two-year note slipped to 0.50 percent from 0.54 percent.


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Fed says economic recovery on firmer footing

Fed says economic recovery on firmer footing
Associated Press
Article Posted by Calvin Lee Ledsome Sr.,

WASHINGTON (AP) — The Federal Reserve offered its most optimistic view of the U.S. economy since the recession ended, even as Japan’s nuclear crisis stoked new worries around the globe.

The economic recovery is on “firmer footing” and the jobs market is “improving gradually,” the Fed declared in its statement released at the conclusion of its meeting Tuesday.

That’s a more upbeat tone from its previous meeting on Jan. 26, when Fed policymakers said the rate of economic activity was “insufficient” to bring about “significant improvement” in the job market.

The Fed also downplayed inflation risks. And it dropped the phrase “disappointingly slow” in describing the progress made lowering the nation’s unemployment rate. That’s a reflection of a nearly full percentage point drop in just three months — the sharpest decline in unemployment since 1983.

The Fed on Tuesday, in a unanimous decision, said it was maintaining the pace of its $600 billion Treasury bond-purchase program to help the economy grow more strongly and to lower unemployment, which now stands at 8.9 percent.

The Fed made no mention of Japan’s crisis, which caused stocks to plunge earlier in the day. But the more positive outlook from the Fed helped Wall Street recover from a rough start. The Dow Jones industrial average ended the day 137 points down, after falling by as much as 297 points in morning trading.

“Finally, the Fed is giving us a more upbeat outlook. It is not the all-clear signal. But the Fed is much more positive in terms of the sustainability of the economic recovery going forward,” said economist Chris Rupkey at Bank of Tokyo-Mitsubishi UFJ.

Rupkey and other economists viewed that as signal that the Fed won’t embark on a third round of stimulative bond buying when the current program ends in June.

The Fed’s bond-buying program would help the U.S. economy withstand widening economic risks from home and abroad. It is intended to lower loan rates and boost stock prices. Those forces should spur Americans to spend more and companies to hire more.

The Fed said higher prices for energy and other commodities are increasing inflation. But it predicted that the pickup in prices will be “transitory.” That’s consistent with the assessment Fed Chairman Ben Bernanke gave to Congress earlier this month. The Fed said it will keep close tabs on inflation trends.

Despite the Fed’s more optimistic outlook, the list of potential risks to the economy has grown since the Fed’s last meeting.

Japan is the world’s third-largest economy, so the earthquake and ensuing nuclear crisis there are certain to affect the global economy.

Oil price have spiked since January, rising as investors worry that unrest in the Middle East and Africa could hurt global supply. Oil prices have dipped in recent days and are now hovering around $97 a barrel. Still, gasoline prices have stayed high and now average $3.57 a gallon nationwide.

Investors also are concerned that Europe’s debt crisis could linger.

For the United States, the threats have the potential to slow the U.S. economy, or stoke inflation. Or both.

Higher energy prices have some economists lowering their growth forecasts for the first three months of the year. They said high energy prices will slow consumer spending, which accounts for 70 percent of economic activity. JPMorgan Chase now predicts growth in the January-March quarter of just 2.5 percent, down from 3.5 percent.

The Fed, however, observed that consumers are increasing the amount they spend. And Fed dropped concerns made after previous meetings that high unemployment, hard to get loans and depressed home values could restrain the pace of consumer spending.

“This is a significant acknowledgment that the American consumer is back in action, providing additional support to the expansion,” said economist Sal Guatieri at BMO Capital Markets.

Tax cuts are giving Americans more money to spend. Retail sales grew for the eighth straight month in February. Businesses are hiring more.

Economists expect the Fed will spend the full $600 billion and won’t extend the bond-buying program beyond its June end date.

However, economists aren’t expecting the Fed to rush and start boosting interest rates any time soon.

The Fed on Tuesday maintained a pledge to hold its key rate at a record low near zero for an “extended period.”

However, some economists believe the Fed could drop that pledge as soon as its next meeting in late April.

But that wouldn’t signal an imminent rate increase.

Many economists don’t think the Fed will start raising rate until early next year. Others think it will be at the end of 2012.

The central bank’s key rate has been at a record low since December 2008. An increase in that rate would boost lending rates charged to consumers. These include rates on certain credit cards, home equity loans and some adjustable-rate mortgages.

Bernanke, however, has said the economic recovery must be deeply rooted before the Fed moves to tighten credit.

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President Barack Obama offers deeper cuts, appeals for budget deal

Obama offers deeper cuts, appeals for budget deal
March 5, 2011, 11:27 p.m. EST
Associated Press
Article Posted by Calvin Lee Ledsome Sr.,

WASHINGTON (AP) — President Barack Obama says he’s willing to make deeper spending cuts if Congress can compromise on a budget deal that would end the threat of a government shutdown.

Obama’s appeal for common ground came Saturday in his weekly radio and Internet address, but lacked specifics on how to bridge the $50 billion gulf that divides the White House and Democratic budget proposal from the deeper reductions offered by Republicans.

The competing plans are headed for test votes in the Senate in the coming week; neither is expected to survive, setting the stage for further negotiations.

The government is running on a temporary spending bill that expires March 18, so the parties have until then to come up with a plan to pay for the remainder of the budget year through September.

“We need to come together, Democrats and Republicans, around a long-term budget that sacrifices wasteful spending without sacrificing the job-creating investments in our future,” Obama said.

“My administration has already put forward specific cuts that meet congressional Republicans halfway. And I’m prepared to do more,” said Obama.

But the claim that Democrats are meeting Republicans halfway only stands up under the Democratic explanation of the intricate numbers game being played on Capitol Hill.

“We’ll only finish the job together — by sitting at the same table, working out our differences and finding common ground,” the president said.

Facing a federal deficit of $1.6 trillion, Republican leaders are under pressure from tea partiers to stick to a deep lineup of $61 billion in spending cuts for the current budget year that’s been passed by the GOP-controlled House.

Obama has threatened to veto that plan, and a Democratic offer of $6.5 billion in cuts — on top of $4 billion already signed into law — restores money the House GOP cuts from education, health and other programs.

Republicans used their weekly address to reject Obama’s approach on the budget.

“You may have heard President Obama say that we need to make sure ‘we’re living within our means,'” said freshman Rep. Diane Black, R-Tenn. “He’s right about that. Unfortunately, his budget doesn’t match his words.

“It continues out-of-control spending, it adds to our $14 trillion debt and it adds to the uncertainty that makes it harder to create jobs. Maintaining the status quo — and refusing to offer a credible plan to cut spending — is just unacceptable and inexcusable,” she said.

“The American people want us to keep the government running while cutting its cost,” Black said

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Deep spending cuts by state and local governments pose a growing threat to US economy

State and local budget cuts are slowing US economy
Feb. 25, 2011, 7:09 p.m. EST
Article Published by Associated Press
Article Posted by Calvin Lee Ledsome Sr.,

WASHINGTON (AP) — Deep spending cuts by state and local governments pose a growing threat to an economy that is already grappling with high unemployment, depressed home prices and the surging cost of oil.

Lawmakers at state capitols and city halls are slashing jobs and programs, arguing that some pain now is better than a lot more later. But the cuts are coming at a price — weaker growth at the national level.

The clearest sign to date was a report Friday on U.S. gross domestic product for the final three months of 2010. The government lowered its growth estimate, pointing to larger-than-expected cuts by state and local governments. The report suggested that worsening state budget problems could hold back the recovery by putting more people out of work and reducing consumer spending.

Across the country, governors and lawmakers are proposing broad cutbacks — lowering fees paid to nursing homes in Florida, reducing health insurance subsidies for lower-income Pennsylvanians, closing prisons in New York state and scaling back programs for elderly and disabled Californians.

“The massive financial problems at the state and local levels have and will continue to restrain growth,” said economist Joel Naroff of Naroff Economic Advisors.

State and local governments account for 91 percent of all government spending on primary education, according to the Brookings Institution. And they provide 71 percent of higher-education spending. States also account for more than 70 percent of spending on roads, bridges and other infrastructure.

But those same governments cut spending at a 2.4 percent rate at the end of last year. And economists predict they will slash their budgets by up to 2.5 percent this year — potentially the sharpest reduction since 1943. The deepest cuts are expected to occur in the first six months of this year.

The worst cuts so far— 3.8 percent — came in the January-to-March period of 2010. That was the sharpest quarterly drop since late 1983, when the U.S. economy was recovering from a severe recession. Most economists think the cutbacks this year will exert an even bigger economic drag than last year.

Newly elected Republican governors are leading the charge. They’re acting on campaign pledges to shrink government to meet budget gaps. They favor smaller governments with lower taxes and less regulation, which they say will boost private-sector growth and job creation.

Some Democrats — including Govs. Andrew Cuomo of New York and Jerry Brown of California — have followed suit. They’re pushing for cuts to social programs and concessions from unions.

The governors’ push for painful cuts comes just as they gather in Washington this weekend for their winter meeting.

“We have to balance our budgets. We have to address costs. And we also have to move forward at the same time,” Maryland Gov. Martin O’Malley, head of the Democratic Governors Association, said after his group met with President Barack Obama and Vice President Joe Biden at the White House.

No state has attracted more attention than Wisconsin. Pointing to the state’s projected $3.6 billion gap, Republican Gov. Scott Walker wants to strip state workers of collective bargaining rights. He also wants them to contribute more to their pensions and health insurance costs.

The budget fight has taken center stage in Congress. Democrats are bending to Republican demands for spending cuts to avoid a shutdown of the federal government next week.

The reduction in federal spending has a direct effect on states and municipalities. They depend on money from Washington to keep schools operating, put police officers on the street and subsidize public services like job training. The end of federal stimulus programs is also widening state deficits.

Many governors, including those in Florida, New York and Colorado, are pursuing tighter budgets. Their proposals include laying off public workers and teachers, reducing spending for education and health care, and ending some social services. They’re also targeting public pension funds and health insurance plans and seeking larger contributions from public employees.

State and local budget experts fear the cutbacks will intensify this year. States are struggling to close budget gaps of about $125 billion for the upcoming budget year, according to the Center on Budget and Policy Priorities.

That’s a smaller gap than states faced in the past two years. But this time, governors won’t have federal stimulus funds to help close the deficits. And state governments, in turn, are reducing the aid they send to local governments.

“We suspect that these cutbacks are going to deepen over the next couple of quarters,” said Mark Muro, a senior fellow at the Brookings Institution. “It’s likely we’re only beginning to see the state and local drag.”

In Florida, newly elected Republican Gov. Rick Scott wants to reduce the state’s budget 5 percent. To get there, he wants to slash 8,600 state jobs and reduce Medicaid costs through a 5 percent cut in fees paid to hospitals and nursing homes, but not doctors.

Health-insurance cuts are popular with many Republican governors. Pennsylvania Gov. Tom Corbett, facing a projected $4 billion-plus deficit, said he can’t find the cash to extend a program that subsidizes health care for 41,000 lower-income adults and is nearly out of money.

Arizona Gov. Jan Brewer is suggesting that the state drop Medicaid coverage for 250,000 low-income people to make up about half of the state’s projected shortfall of about $1 billion.

It’s not just Republicans demanding tough fiscal medicine. In New York, Gov. Cuomo has said up to 9,800 state employees could be laid off if public-employee unions don’t agree to millions of dollars in concessions.

The newly elected Democrat has also proposed $1 billion in cuts to New York’s Medicaid program, with its 4.7 million recipients. He also wants to close some prisons, freeze wages for nearly 200,000 state workers, cut $1.5 billion in aid to public schools and chop 10 percent from the state’s operating budget.

In California, Brown has imposed a state hiring freeze and is proposing cuts to a host of social programs that serve the poor, elderly and disabled. He is also seeking more than $12 billion in tax extensions and fees. The state is grappling with a $26.6 billion fiscal crisis.

State spending represents just a fraction of the nation’s economic activity. Consumers typically spend roughly six times more than state and local governments do. So a big increase in consumer spending can offset public-sector cuts.

U.S. consumers boosted spending at a 4.1 percent annual rate in the final quarter of 2010 year; state and local governments cut spending at a 2.4 percent pace. If consumers had spent just 0.4 percentage point more, they would have offset the state and local government cutbacks.

That said, layoffs hurt consumer spending. And states and local governments are cutting their payrolls. State and local governments have cut more than 400,000 jobs in the past two years. Budget pressures will force an average of 20,000 more job cuts each month for the rest of this year, estimates Jon Shure of the Center on Budget and Policy Priorities, a left-leaning think tank.

State tax revenue has begun to grow again after falling sharply in recent years. But many governors are now proposing tax cuts as a way to encourage business activity, Shure said. That’s likely to escalate pressure for spending cuts because most states must balance their budgets each year.


Contributing to this story were Associated Press writers Christopher S. Rugaber in Washington; Sandra Chereb in Carson City, Nev.; Juliet Williams in Sacramento, Calif.; Paul Davenport in Phoenix; Geoff Mulvihill in Haddonfield, N.J.; Michael Virtanen in Albany, N.Y.; Colleen Slevin in Denver; Marc Levy in Harrisburg, Pa.; Jim Davenport in Columbia, S.C.; Bill Kaczor in Tallahassee, Fla.; and Jonathan Cooper in Salem, Ore.

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Uncertain future for US policy as Egypt shifts

Uncertain future for US policy as Egypt shifts
Feb. 12, 2011, 12:29 p.m. EST
Associated Press

WASHINGTON (AP) — The United States faces an intensely uncertain future in Egypt, a stalwart ally of decades in the volatile Middle East, where key tenets of American foreign policy are now thrown into doubt.

Behind President Barack Obama’s praise for Egypt’s protesters and the outcome they achieved lie major unanswered questions about what will come next now that President Hosni Mubarak has been overthrown after 30 years of authoritarian rule. For many people in Egypt, they were years of oppression, corruption and poverty; but for the U.S., Mubarak was an anchor of stability at the helm of the world’s largest Arab nation, enforcing a peace treaty with Israel and protecting vital U.S. interests, including passage for oil through the Suez Canal.

For now, the military is in charge, but whether, when or how a transition will be made to the kind of democratic society that meets the protesters’ demands remains unknown. Speaking at the White House on Friday, Obama acknowledged difficult days ahead and unanswered questions but expressed confidence that the answers will be found.

Most tellingly, as the U.S. warily eyes the days ahead, Obama singled out the Egyptian military for praise in the restraint it showed through more than two weeks of largely peaceful protests. But the president emphasized the military’s role as a “caretaker” leading up to elections now set for September and said it must now “ensure a transition that is credible in the eyes of the Egyptian people.”

He said that means lifting Egypt’s hated 30-year-old “emergency” police powers laws, protecting the rights of citizens, revising the country’s law and constitution “to make this change irreversible and laying out a clear path to elections that are fair and free.”

But just as the U.S. had limited influence during the uprising that seemed to spring almost out of nowhere to overtake Egypt, it has limited influence over what happens next. The U.S. provides some $1.5 billion a year in aid to Egypt, the vast majority of it to the military, and has a good relationship with the Egyptian military, which often sends officers here for training. That doesn’t guarantee a commanding U.S. role.

“Do we have leverage or influence?” asked Aaron David Miller, a former Mideast adviser to six U.S. secretaries of state. “Well, did we have leverage and influence over the past few weeks? That’s highly arguable.”

Miller, now with the Woodrow Wilson Center think tank, said it will take weeks or months to sort things out. And in the end, he said, “I think Egypt will be a far less forgiving place for American interests as democracy takes root — if in fact it does.”

Asked about the uncertainty ahead, especially with respect to the role of the military, presidential spokesman Robert Gibbs could only answer: “I don’t think we have to fear democracy.”

Beyond the question of who will end up in control in Egypt and whether the U.S. will still be able to count the country as a firm and stable ally, there are concerns over whether the unrest that brought down Mubarak will spread to other nations in the Middle East, including oil-rich autocratic neighbors.

That prospect looms even as the U.S. handling of the Egypt situation has angered some leaders in the region who thought Washington was too quick to abandon Mubarak — although Obama and his administration studiously avoided ever calling outright for the president’s ouster.

On Friday, after Mubarak’s resignation was announced, Obama was able to give fuller expression to his views.

“By stepping down, President Mubarak responded to the Egyptian people’s hunger for change,” Obama said, in words reminiscent of his own presidential campaign.

Of the protesters, the president said: “This is the power of human dignity, and it can never be denied.” He compared them to the Germans who tore down the Berlin Wall and to independence leader Mohandas K. Gandhi‘s nonviolent ranks in India.

Mubarak’s resignation came less than 24 hours after he’d surprised the White House and many others by delivering a defiant speech Thursday in which he refused to step down, confounding widespread expectations that he’d do so. Obama learned of the announcement of his resignation Friday morning when an aide brought him a note during a meeting in the Oval Office.

Then he spent a few moments, along with the rest of the world, watching the joyous celebrations in Cairo on TV.

The protests arose in a country with enormous social problems, with vast differences between the haves and the have-nots. It is a country where more than 50 percent of the adult population is illiterate and some 40 percent live below or close to the poverty line. Rising costs of food were among the leading factors underpinning the protests. Some of the impoverished Egyptians are beneficiaries of U.S. food aid; officials said Friday that U.S. aid to Egypt was not expected to be affected by Mubarak’s departure.

It was not clear what role Islamic militant groups such as the now-banned Muslim Brotherhood might play in the new government that emerges. Egypt’s ruling military on Saturday moved to resolve one area of uncertainty by reassuring its international allies that there would be no break in its landmark 1979 peace deal with Israel.

The top U.S. military officer, Chairman of the Joint Chiefs of Staff Mike Mullen, will be in Israel on Sunday and Monday, with developments in Egypt expected to be at the top of the agenda. The meeting was previously scheduled. Mullen is also visiting Jordan, another Mideast ally facing the prospect of civil unrest.


Associated Press writers Tom Raum, Robert Burns, Ben Feller and Mathew Lee contributed to this report.

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President Barack Obama promoted plans Thursday to bring high-speed wireless to nearly all American households

Obama promotes plan for near universal wireless
Feb. 10, 2011, 5:17 p.m. EST
Published by Associated Press Writer
Posted by Public Blog News Posting Services Group

MARQUETTE, Mich. (AP) — President Barack Obama promoted plans Thursday to bring high-speed wireless to nearly all American households, pushing his domestic agenda in a small, snowy city in Michigan’s Upper Peninsula on a day of dramatic developments in Egypt.

Obama kept in touch with his security team throughout the trip and opened his remarks at Northern Michigan University with brief comments on the events overseas, where President Hosni Mubarak appeared close to resigning. But in a late-night speech Egypt’s president announced he was transferring some powers to his deputy.

Mubarak did not step down from office. “We are witnessing history unfold,” Obama said.

He then turned to the importance of investing in wireless technology, part of a new White House focus on innovation, competitiveness and infrastructure as a pathway to jobs and “winning the future.” The president compared the goal of extending wireless access to important successes that connected previous generations of Americans: the building of railroads and the federal highway system.

“For millions of Americans, the railway hasn’t shown up yet,” Obama said. “For our families and our businesses, high-speed wireless service: that’s the next train station; it’s the next off-ramp. It’s how we’ll spark new innovation, new investments and new jobs.”

Obama wants to make high-speed wireless available to 98 percent of the population within five years, a goal he set out in his State of the Union address.

It’s a lofty aim considering such technology is only now being built in major cities by AT&T, Verizon and others. And it will cost billions of dollars that Republicans now running the House signaled they may be unwilling to spend. But the president cast it as crucial for America’s future prosperity and competitiveness with other nations.

“This isn’t just about faster Internet,” the president said. “It’s about connecting every corner of America to the digital age.”

Obama has taken a domestic trip each week since the Jan. 25 speech to promote different aspects of his competitiveness agenda; previous trips focused on high-speed rail and energy efficiency.

Obama’s wireless plan involves increasing the space available on the airwaves for high-speed wireless by auctioning off space on the radio spectrum to commercial wireless carriers. The White House says this would raise nearly $30 billion over 10 years, and the money could be spent on initiatives that include $10 billion to develop a national broadband network for public safety agencies and $5 billion for infrastructure to help rural areas access high-speed wireless.

Portions of the plan will be in the 2012 budget Obama sends to Capitol Hill on Monday. Republicans sounded skeptical Thursday about the proposal, which needs congressional approval.

Rep. Fred Upton, R-Mich., chairman of the House Energy and Commerce Committee, said billions had already been allocated for broadband services in the 2009 economic stimulus bill. “Before we target any more of our scarce taxpayer dollars for broadband, it is critical to examine whether the money already being spent is having an impact,” said Upton, who is holding hearings on the topic.

But Obama’s proposals won applause from AT&T and other telecom companies.

White House domestic policy adviser Melody Barnes told The Associated Press that Obama wants more spending on Internet broadband because business leaders and emergency responders have told him more funds are needed. “We know that this is the right thing to do,” she said.

Obama chose Marquette for Thursday’s remarks because the university town of 20,000 overlooking Lake Superior is becoming an example of how the Internet can bring opportunity and prosperity to far-flung locales. Numerous local businesses market online. Northern Michigan University also has a high-tech wireless program, which Obama saw in action, that lets students and teachers connect with other classrooms in the region.

Michigan will also be an important state in the 2012 presidential campaign.


Associated Press writers Joelle Tessler and Julie Pace in Washington and John Flesher in Marquette, Mich., contributed to this report.

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The standoff in Egypt and uncertainty about where it will lead is causing global economic jitters

Egyptian turmoil helping to lift oil, food prices
Feb. 5, 2011, 7:09 a.m. EST
Article Published by Associated Press
Article Posted by Public Blog News Posting Service

WASHINGTON (AP) — The standoff in Egypt and uncertainty about where it will lead is causing global economic jitters. It’s already pushing up the price of oil and food, and there’s no telling how long the turmoil will last.

The big worry is that popular uprisings and revolution will spread to Egypt’s rich autocratic neighbors who control much of the world’s oil supply.

How far will anti-government movements go? Will oil supplies be disrupted? Will the U.S. see its influence in the region decline and that of Iran and other fundamental Islamic regimes surge?

Right now, these are open questions. But there’s no question that the crisis has created new risks for still shaky world economies and put a cloud over world financial markets.

Instability in the Middle East, if prolonged, could jeopardize fragile recoveries in the United States and Europe. It could limit job creation and fuel inflation.

“If the turmoil is contained largely to Egypt, then the broader economic fallout will be marginal,” said Mark Zandi, chief economist at Moody’s Analytics. “Now, obviously, if it spills out of Egypt to other parts of the Middle East, the concern goes to a whole other darker level.”

“It is certainly now on my radar screen,” he said.

The situation remains tense after more than 10 days of street demonstrations as protesters demanding President Hosni Mubarak‘s immediate resignation continue to skirmish with pro-Mubarak loyalists in the center of Cairo.

Such protests earlier brought down the government of Tunisia and have already spread in more modest ways to include Yemen and Jordan.

“The real worry, I think is if these protests continue indefinitely and there isn’t more reassurance about stability in Egypt and in the broader region,” said Shadi Hamid, a researcher on Gulf affairs at the Brookings Institution’s Doha Center in Qatar. “We’re going to see a continued decline in the regional economy and that will, of course, have an effect on the U.S. economy.”

Hamid suggested the Obama administration’s position of first supporting Mubarak and then upping the pressure on him to leave immediately was not helping the situation. “There is a real danger here that the Obama administration will be remembered as resisting change,” he said.

President Barack Obama said Friday he hoped Mubarak would focus on his legacy as Egypt’s leader for nearly three decades and “end up making the right decision” to step down. But Obama stopped short of calling on Mubarak to leave immediately.

Mubarak has said he will not run for re-election when his term expires in September, but that hasn’t satisfied protesters.

Although demonstrations at week’s end were more subdued than on Thursday, when the clashes were violent and hundreds were injured, the unrest already has had an impact on energy prices in the United States.

The average price for a gallon of regular gasoline in the U.S. was $3.12 on Friday — up 2.4 cents just in the past week. Analysts expect prices to stay above $3 a gallon — the highest since 2008 — and likely go even higher until the conflict in Egypt is resolved and tensions are eased in neighboring countries.

Oil prices have hovered at around $90 a barrel over the past week, with some analysts predicting the Egyptian crisis will lead to $100 per barrel prices sooner rather than later.

Traders worry the unrest might spread to oil-producing countries in the region and even affect shipments through the Suez Canal. Egypt is not a major oil producer, but it controls the canal and a nearby pipeline that together carry about 2 million barrels of oil a day from the Middle East to customers in Europe and the United States.

Several large Egyptian refineries near the canal have been the site of recent protests.

So far, traffic through the canal has been unimpeded. But it’s high on everybody’s worry list. It was blockaded by the Egyptian military for eight years after the 1967 war with Israel and shut briefly during the Suez crisis of 1956.

“I think the major fear regarding the Suez Canal revolves around the power vacuum that’s being created by this uprising,” said Jeff Sica, president of Sica Wealth Management in Morris town, N.J. “The prospect for the Suez Canal being controlled by an unfriendly regime would further devastate the economy.”

The likelihood of the canal being shut or blockaded seems remote. It is a huge source of revenue for Egypt that the government will not want to lose, no matter who is in charge. Still, just the possibility could spook financial markets if tensions escalate.

Meanwhile, rising food prices helped fuel the popular uprising in Egypt, where most of the population is poor. And the turmoil there and unrest in Somalia and other Arab nations now appears to be driving food prices even higher.

Some nations in the region, including Saudi Arabia and Algeria, have indicated they may begin increasing their stockpiles of wheat and other grains.

Hoarding can lead to more hoarding, and political strife can accelerate the process. Egypt is the world’s largest importer of wheat.

Iranian leaders have much to gain from the Egyptian turmoil. Not only is Mubarak the most anti-Iranian of American allies, but rising oil prices have clear economic benefits to Tehran.

“Hundred dollar-a-barrel oil for the Iranians does a lot to take down the pain of the sanctions that we’re putting on them, so they must be sitting there rubbing their hands with glee at the moment,” said Martin Indyk, a former U.S. ambassador to Israel.


AP Diplomatic Writer Barry Schweid contributed to this report.

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