Soaring Asian inflation spreads overseas

Inflation rates are rising in the U.S. and Europe, but nowhere near as fast as in Asia, where countries like India and Vietnam are already grappling with double-digit inflation. But rising prices in Asia are already starting to affect U.S. inflation, as once-cheap imports are becoming more expensive. “The epicenter of the inflationary storm is really in Asia,” said Cyd Tuano-Amador at the Philippines Central Bank. (The New York Times) The rising inflation rate could cancel out the average 3.5 percent raise that U.S. workers can expect this year, according to a survey by Watson Wyatt Worldwide Inc. The Labor Department pegged annual U.S. inflation at 5 percent in June. (The Wall Street Journal, paid subscription)

Insurer Tokio Marine buys Philadelphia Consolidated

Tokio Marine Holdings, Japan’s largest insurer, agreed to buy property and casualty insurer Philadelphia Consolidated Holdings for $4.7 billion to expand into the U.S. market. The cash deal, the largest U.S. acquisition by a Japanese financial firm, represents a 73 percent premium on Philadelphia Consolidated’s closing price yesterday. (Reuters) A declining population and slow economy give Japanese insurers limited prospects in their home market. “It’s quite an aggressive move, but it is quite important for a Japanese financial firm to increase its presence in a major insurance market,” said Mitsushige Akino at Ichiyoshi Investment Management Co. in Tokyo. (Bloomberg)

WaMu stumbles, but bank sector cushions fall

Washington Mutual reported a record $3.3 billion quarterly loss, much worse than analysts were expecting. The top U.S. thrift increased its loss reserve by $3.74 billion, to $8.46 billion, to cover the declining value of its souring mortgage assets and other credit problems. (AP in Yahoo! Finance) WaMu’s shares initially rose in extended trading, but then fell after Moody’s said it might downgrade the bank. ( In regular trading, Washington Mutual shares and those of four other banks that reported big losses or tanking profits rose despite their dire earnings. “We are resetting expectations for bank profitability,” said Christopher Whalen at Institutional Risk Analytics. “We are redefining bad.” (The New York Times)

Behind the scenes at the inflation monitor

Federal Reserve economists know quite a bit about what drives inflation figures higher, but they don’t know much about how those figures affect the behavior of consumers and businesses. And a lot rides on what consumers do: If they cut expenses to make up for rising food and fuel costs, inflation might not get out of hand; if they decide that higher prices mean they need higher wages, watch out. So a team of six Fed economists is looking for clues about consumer behavior in advertisements, industry surveys, and phone calls to retailers. The timing of a sale on summer dresses, say, can speak volumes. “You use a fair amount of finesse, judgment, anecdotes, and indicators,” said economist Michael Feroli, a former Fed forecaster. (Bloomberg)