ECB sees slow recovery and many risks

ECB President Mario Draghi said Europe's recovery is still at risk and needs continued support.

LONDON (CNNMoney)

The ECB said it expected GDP in the 17-nation eurozone would shrink by 0.4% in 2013, compared with a previous forecast for contraction of 0.6%. The revision is in keeping with data showing a stronger-than-expected return to growth in the second quarter and encouraging signals from surveys of business activity and confidence.

But speaking to reporters after the bank decided to keep interest rates at their record low of 0.5%, Draghi reiterated that they would remain at current levels or lower for an extended period to support the "slow pace" of recovery in output.

"I am very, very cautious about the nature of this recovery," Draghi said. "The shoots are still very green."

Risks to the bank's economic outlook were still tilted to the downside, he added, pointing to recent declines in government bond prices and emerging market currencies, the risk of higher oil and commodity prices due to conflict in the Middle East and weaker than expected global demand.

The ECB also trimmed its forecast for GDP growth in 2014 to 1.0%, down from 1.1% in June.

Related: Europe's recovery gaining momentum

Ken Wattret, head of European economics at BNP Paribas, said Draghi had struck a clearly dovish tone.

"That the guidance leaves open the option of lower policy rates is nothing new but the 'feel' of the statement and the question and answer session afterward gave the strong impression that the ECB not only maintains a bias to ease but wants to convince markets that it is willing to act," he wrote in a research note.

Earlier, the Bank of England also decided to keep interests rates at 0.5% and the volume of its asset purchase program, aimed at stimulating economic growth, unchanged at £375 billion.

The U.K. economy has shifted up a couple of gears in recent months as activity in manufacturing, services and construction has accelerated, presenting the bank's governor, Mark Carney, with a dilemma.

Related: Don't trust your central bank? Bet against it.

Faster growth and talk that the U.S. Federal Reserve may begin scaling back its bond-buying program as early as this month have pushed up yields on U.K government bonds. Many economists now expect Bank of England rates to rise as early as 2015.

But Carney said only last month that the bank won't raise interest rates until the middle of 2016, because it will take that long for unemployment to fall to below 7%, guidance that is being viewed with growing skepticism by investors.

The bank issued no substantive comment with its decision Thursday, possibly reflecting division among its policymakers as to whether the guidance can hold or not.

First Published: September 5, 2013: 9:41 AM ET

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AP tests, 'early college': High school students get a head start

High school students take Advanced Placement courses to earn college credit.

NEW YORK (CNNMoney)

"My parents need as much help as they can get [to cover tuition]," said Nasuuna, who will be attending the University of Massachusetts, Amherst this fall.

Nasuuna passed seven Advanced Placement exams at her public high school in Chelsea, Mass., including one in English that will allow her to forgo an introductory writing course her freshman year.

She is one of a growing number of students getting a head start on college credits while they are still in high school, cutting costs and speeding toward degrees -- and jobs -- as quickly as possible.

But it's not just about taking AP tests. High school students are also enrolling in college courses, receiving college credit for life experiences, such as community service or being able to speak a foreign language, or even skipping their junior or senior year altogether to attend so-called "early colleges."

Related: 2-year degrees that are paying off better than BAs

"Everyone is looking for a leg up," said Dave Taylor, principal of the Dayton Early College Academy in Ohio, a charter high school where students simultaneously enroll in classes at nearby Sinclair Community College and start earning college credits as early as their sophomore year.

Some 1.3 million students took classes for university credit before completing high school during the 2010-2011 academic year, up 67% since 2003, according to the U.S. Department of Education.

Much of this trend is being driven by the skyrocketing cost of college. Students enrolled in early college high schools, for example, earn an average of 36 college credits, nearly a third the number they'll need for a bachelor's degree, according to a study by the advocacy group Jobs for the Future.

But there's also evidence that exposing high school students to the challenges of college-level work can increase their eventual likelihood of success.

More students who take college-level courses in high school go on to college than their classmates who don't, a report released in June by the American Institutes for Research, or AIR, found.

They're also more likely than their peers to stay in college once they get there, earn higher grades, and eventually graduate, according to a separate study conducted in Florida and New York by the Community College Research Center at Teachers College, Columbia University.

"What we hear from kids all the time is, 'It's amazing to me that I can sit in a college classroom with 22-year-olds,'" Taylor said. "When you're actually doing college work, it ups the ante quite a bit, so they feel like they can compete and be successful wherever they might choose to go."

Most college courses that are offered in high schools are taught by faculty from two-year community colleges under so-called dual-enrollment partnerships. They're conducted either in the high schools themselves or at close-by higher-education institutions.

Related: How much will that college really cost?

In Oregon and Colorado, some students can take a fifth year of high school, using it to earn credits at nearby community colleges. Since they're technically still enrolled in their local school districts their tuition, fees, and textbooks are paid for by state funding for public-school education.

The universities and colleges have motivations of their own for going to this extra trouble. "They know they would otherwise get students who are unprepared, who end up in remedial courses, or who don't graduate," said Joel Vargas, vice president of Jobs for the Future.

High school students can also take the College Level Examination Program test, or CLEP, and if it shows they've mastered any of 33 different college-level subjects from what they've learned in jobs, through community service or because they're fluent in a language other than English, they can submit the results for prospective college credit.

This doesn't mean that every university or college will accept all of the credits students earn, though a survey by the Western Interstate Commission for Higher Education found that 92% of public institutions nationwide give credit for at least some dual-enrollment courses and 91% for AP exams.

An added benefit from doing college-level work in high school is that it allows students to experience what higher education is like while still living at home.

"What we're seeing more of now is a greater emphasis on programs that are smoothing over the college transition," said Adam Lowe, executive director of the National Alliance of Concurrent Enrollment Partnerships.

On the opposite extreme are early colleges that put 10th or 11th graders who have outgrown what their high school can offer them into college courses and directly on the fast track to a degree, with a high school diploma conferred along the way. All are private, and charge the usual college tuition.

Related: The other reason students are drowning in debt

"Students talk about how relatively isolated they felt in their sending schools because they were interested in Plato and their classmates were interested in the five-paragraph essay," said Peter Laipson, provost at Bard College at Simon's Rock, which enrolls students as young as 16.

But whether they end up going to a four-year university or a community college, these high school students are smart enough to know they're saving themselves and their families a lot of money.

"Certainly we hear that anecdotally -- that I got this almost for free," said Andrea Berger, who led the research work at AIR. "And certainly they are getting [a degree] for less money."

First Published: September 5, 2013: 9:52 AM ET

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Stocks look to make it a three-day rally

Click chart for more markets data.

NEW YORK (CNNMoney)

Although the continuing threat of a U.S.-led military strike against Syria has kept investors on edge, the Dow, S&P 500 and the Nasdaq were all up slightly in morning trading.

Click here for more on stocks, bonds, commodities and currencies

Waiting for the big jobs report. Investors had two bits of labor market data to chew on. The jobs numbers released by payroll processing firm ADP showed hiring continuing at a modest pace.

The Labor Department's initial jobless claims figures also pointed to a steady recovery in the job market, with fewer people filing for unemployment.

But Friday is the big day for the markets. The government releases the August jobs report. Economists surveyed by CNNMoney believe that 185,000 jobs were added last month and that the unemployment rate dipped to 7.3%.

Investors will be watching those numbers closely and will immediately start speculating about whether the jobs report will lead the Federal Reserve to announce plans to begin cutting back on its bond purchase program at its next policy meeting later this month.

Related: Impact of war on stocks and oil

September stock bump: The major stock indexes have added more than 1% during the first three trading days of the month so far. That's helping to erase some of the losses from a brutal August for stocks. But 2013 has still been a solid year for investors. All three indexes are up between 14% and 21% year-to-date.

Global worries: Syria is sure to dominate discussions at the G-20 conference in Russia, which kicks off Thursday. Investors will be listening closely to assess if and when a military strike may occur. The G-20 summit was meant to focus on the global economy, but the debate over Syria is expected to overshadow the event.

The Governing Council of the European Central Bank and the Monetary Policy Committee of the Bank of England decided to keep their key interest rates unchanged. European markets all moved higher

Earlier in the day, the Bank of Japan struck a more upbeat note on prospects for the world's third-largest economy, saying that the country is on track to beat deflation. Asian markets closed mixed.

Related: Fear & Greed Index still shows fear

What's moving: Shares in LinkedIn (LNKD) moved up, after falling Wednesday on concerns that a new billion dollar plus offering would dilute existing shareholders. The company sold more than $1.2 billion in stock in a secondary offering Wednesday night. The company's shares are up more than 100% this year.

Shares of Netflix (NFLX) rose after analysts at RBC upgraded their price target for the company. Netflix's stock is nearing its all-time highs from 2011.

Shares of Groupon (GRPN) soared after Morgan Stanley upgraded the online coupon company.

J.C. Penney (JCP, Fortune 500) shares continued to move higher, after soaring Wednesday on news that two major hedge funds added stakes in the troubled retailer.

First Published: September 5, 2013: 9:48 AM ET

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Markets don't care about Yellen vs. Summers

Six top Federal Reserve positions could be up for grabs in the coming months. Ben Bernanke, Sarah Bloom Raskin, Elizabeth Duke, Jerome Powell and Sandra Pianalto are set to leave, and Janet Yellen is a wild card.

NEW YORK (CNNMoney)

Current Federal Reserve Vice-Chair Janet Yellen, once the frontrunner, is now a distant second to Summers, the former Treasury secretary and adviser to President Obama, according to betting site Paddy Power.

But just because gamblers have a favorite candidate, doesn't mean the financial markets really give a hoot.

When the White House revealed Summers as one of the top contenders in early August, markets hardly reacted to the news, noted Justin Wolfers, a University of Michigan economist and senior fellow with the Brookings Institution. Stocks barely moved, exchange rates were stable, and most importantly, inflation expectations didn't budge.

If market participants believed there was a substantial difference between the ability of either Summers or Yellen to maintain low and stable inflation, a more noticeable shift would have shown up.

Related: Female economists: Pick Janet, but leave gender out of it!

In short, markets judge the Summers-versus-Yellen race as a nonevent, Wolfers said. That's partly because both are considered "doves," which means they're likely to give inflation a bit of growing room if it means they can focus on stimulating the economy to bring down unemployment.

"If you talked to academic economists, they would be hard pressed to articulate major macroeconomic differences between the candidates," Wolfers said. "All the major candidates are centrist democrats."

General uncertainty about the rest of the Fed's leadership could be having a bigger impact than the Summers vs. Yellen debate, as four other top Fed officials could be leaving their posts in the months ahead.

Fed Governor Elizabeth Duke is retiring, Gov. Jerome Powell's term expires in January, and Gov. Sarah Bloom Raskin is taking a number two position at the Treasury Department. And Cleveland Fed President Sandra Pianalto, who was slated to be a voting member on the Fed's policymaking committee next year, is also stepping down.

If Summers gets Bernanke's job, it's unclear if Yellen would also leave the Fed. If she does, that would leave a sixth seat vacant among the 12 central bank voters.

Related: Four downsides of a chattier Fed

Why are empty seats an issue?

Under Bernanke's leadership, Fed officials have relied partially on a communications tool known as "forward guidance," in which they alert the public of how long they plan to keep interest rates near zero.

The problem is, can their viewpoints truly be considered credible if half the key decision-makers are checking out soon?

"One generation is promising what the next generation is going to do, and it's not effective until we get a new chairman in there," said Ethan Harris, co-head of global economics for Bank of America Merrill Lynch.

He believes fear of the unknown is already driving interest rates higher, but worries about the future Fed chair only explain a fraction of the rise.

"The reason bond yields are up sharply is there's tremendous uncertainty about the Fed exit strategy, and the change in power from Bernanke to the next chairman is just one part of that picture."

The yield on the benchmark 10-year Treasury has nearly doubled in less than four months, rising from 1.6% in mid-May to 2.9% as of Wednesday. Harris estimates uncertainty about Fed vacancies alone has contributed 0.15 percentage points to the yield.

First Published: September 5, 2013: 6:10 AM ET

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Madden: The $4 billion video game franchise

EA pays company pays John Madden a $2 million for the rights to his name.

NEW YORK (CNNMoney)

A lot has changed since Oakland Raiders Coach John Madden spent time on trains drawing up plays with EA (EA) founder Trip Hawkins in 1988. But one thing has remained consistent: The football franchise is still a perennial bestseller for the game publisher.

EA Sports kicked off the virtual football season last week with the launch of the Microsoft (MSFT, Fortune 500) Xbox 360, Sony (SNE) PlayStation 3 and mobile versions of Madden NFL 25.

Madden plays an important role in EA's library of annual releases. Last year the game was second only to Activision's (ATVI) Call of Duty: Black Ops II with over 5 million copies sold in the United States, according to the NPD Group. Electronic Arts has sold over 100 million copies of Madden games life to date, generating over $4 billion in revenue.

That's not surprising, considering Madden has no real competition and football has become the unofficial American pastime.

Related story: Nintendo unveils new '2DS'

"Madden is instrumental for EA in the sense that this is relatively easy money," said Peter Warman, founder of video game research firm Newzoo, who noted that the Madden games sell well on mobile platforms.

But that success does come with a price. EA pays the National Football League and NFL Players Association $50 million to be the exclusive video game licensee, and the company pays John Madden an additional $2 million for the rights to his name, according to Wedbush Securities video game analyst Michael Pachter.

Pachter expects EA will sell 5 million copies of Madden NFL 25 this year, accounting for 6% of EA's overall sales.

Those are high expectations. But the game appears to be off to a slow start this year, according to Stern Agee video game analyst Arvind Bhatia. Video game store checks indicate Madden NFL 25 may currently be under-performing versus last year.

That may be because customers are delaying their purchases until the new Xbox One and PlayStation 4 go on sale in November.

"We expect sales to pick up once the next-gen consoles are launched," said Bhatia.

Related story: 'Call of Duty Ghosts' is Activision's next billion dollar video game

EA has been facing other off-the-gridiron issues related to Madden.

On July 23, a U.S. District Court jury ruled in favor of Robin Antonick, one of the original designers and developers on Madden, who sued EA for royalties not paid him. That ruling could cost EA $11 million for games made between 1990 and 1996, and it also opens the door for Antonick to pursue the same claims against EA for games released after 1996 -- games with significantly higher revenues surpassing $3 billion.

EA is also paying out $27 million to gamers this year as the result of a class action lawsuit settlement. Gamers sued over the monopoly EA had with the Madden, NCAA Football and Arena Football licenses for games released between 2005 and 2012.

Analysts don't believe the lawsuits will impact sales.

"The lawsuit will hardly affect enthusiasm for the Madden franchise or its sales figures," said Peter Warman, founder of video game research firm Newzoo. "If asked, gamers would stand behind EA I am sure."

Despite the legal distractions, Madden NFL 25 has been receiving glowing reviews from the press with an 81 aggregate score on Metacritic.com. The game introduces a more intuitive running system, which connects nicely with Hall of Fame cover athlete Barry Sanders. It also has a connected online franchise mode and the ability to become an NFL owner and call all the shots in a role-playing game experience.

And although John no longer provides his color commentary for gamers, the NFL Hall of Fame coach is still involved in the game. His name goes a long way with the growing number of NFL fans who are gearing up for the real kickoff of the NFL season, providing EA with an annual "Boom!" in consistent sales.

First Published: September 5, 2013: 6:25 AM ET

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America's historic gusher

(Fortune)

First, two major challenges: We need to be able to extract this abundance safely. And second, we must also transition to sustainable energy sources and reduce greenhouse emissions. I believe we can do both. We're already fracking every day in this country, and though it's not risk-free, clearly it can be done. As for the second problem -- that these new sources of oil and gas might sideline efforts to develop renewables -- that's a much tougher nut. I still feel sanguine, though, because nat gas (which is much of the resource) is cleaner than other fossil fuels (how much is debatable), and through technology is getting cleaner. And because awareness of global warming is growing -- rising sea levels in New York and Florida will do that -- meaning this high-profile issue is unlikely to abate.

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Don't trust your central bank? Bet against it.

Think you know better than the central bank? Paddy Power is giving gamblers the chance to back their own economic forecasts.

LONDON (CNNMoney)

A U.K. gambling company is encouraging risk-takers to pit their wits against the Bank of England and its acclaimed governor Mark Carney.

Betting agency Paddy Power has teamed up with the Adam Smith Institute to launch an online forum for gamblers who want to join financial markets in challenging the bank's forecasts for unemployment and inflation rates.

Carney's first move as governor was to introduce a policy known as "forward guidance." He said last month that interest rates would not rise until U.K. unemployment falls to 7%, a level the bank doesn't expect to see until 2016.

The guidance is supposed to help keep market lending rates low and so support recovery from recession by encouraging more spending and investment.

But growing numbers of financial professionals are calling into question his economic prognosis as each new data release suggests the U.K. recovery is accelerating, which could mean Carney has to raise rates sooner than he expects.

"While Mr. Carney might opine that no action [on rates] is needed in the foreseeable future, the weight of expectations continues to move against him," said Chris Beauchamp, a market analyst at IG.

Armchair economists are, however, much less upbeat than the bank -- Paddy Power's odds show they're currently betting that unemployment will rise to above 8% by June 2015, from 7.8% at present.

Related: Star central banker brought down to earth

The online forum has only been running for a few days, and the odds may shift considerably as betting volumes increase. Ultimately, the bank may have to sit up and take notice.

Sam Bowman, research director at the Adam Smith Institute, said Paddy Power betting could give a good indication of what will really happen in the economy.

"Large decentralized diverse groups are a lot better at coming up with predictions than experts are, especially when they have skin in the game," Bowman told CNNMoney. "It's just an experiment for now. But if this works, it's something the Bank of England should really pay attention to."

Bowman is prepared to put money on it. He's placed some private bets of his own, guessing that unemployment will be between 5% and 8% in June 2015.

First Published: September 4, 2013: 9:31 AM ET

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Possible strikes in Syria rattle investors

NEW YORK (CNNMoney)

The Dow Jones industrial average, the S&P 500, and the Nasdaq all traded flat.

Obama is seeking approval from Congress to carry out a military strike after saying U.S. intelligence showed that Syria used chemical weapons which killed more than 1,400 people.

Several key Democrats and Republicans have thrown their support behind Obama's plan in recent days, though a number of hurdles must still be overcome before the U.S. can take military action.

Click here for more on stocks, bonds, commodities, and currencies.

All three indexes ended with gains on Tuesday, but had pulled back from earlier highs when leaders in the House of Representatives said they would support President Barack Obama's plan for a strike on Syria.

Related: Impact of war on stocks and oil

While investors are more likely to focus their attention on the situation in Syria Wednesday, there are a number of economic reports that could influence market sentiment.

August auto sales will be reported throughout the day. At 2 p.m. ET, the Federal Reserve will release its Beige Book, a report summarizing economic conditions in the country.

Related: Fear & Greed Index sinks into extreme fear

What's moving: Shares of LinkedIn (LNKD) fell more than 2% after the job search website announced plans to sell $1 billion worth of stock in a secondary offering.

Shares of JCPenney (JCP, Fortune 500) rose after two hedge funds -- Hayman Capital and Glenview Capital-- announced new stakes in the struggling retailer.

H&R Block (HRB) shares fell after missing analyst expectations.

Shares of Dollar General (DG, Fortune 500) rose, after the retailer wowed Wall Street with its second quarter results.

European markets moved lower, while Asian markets ended the day mixed.

First Published: September 4, 2013: 9:43 AM ET

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Budget implications of a U.S. strike in Syria

Chairman of the Joint Chiefs Martin Dempsey, Secretary of State John Kerry and Secretary of Defense Chuck Hagel appeared before Senate on Tuesday to make the case for a military strike in Syria.

NEW YORK (CNNMoney)

After all, the Pentagon's budget has been curtailed recently in ways that top officials have warned would create a "hollow" force over the next decade.

However, defense budget experts say, a military strike in Syria is not likely to present a major burden for the federal budget, as long as it's limited and doesn't involve troops on the ground.

"The immediate budget implications for this are quite small," said Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments.

For one thing, the ships, missiles and bombers that the United States might use have already been purchased, said Lawrence Korb, a former assistant secretary of defense who is now a senior fellow at the Center for American Progress. And the training and salaries of the military personnel operating them have already been included in the defense budget.

(Timeline: Washington's budget debate)

So the initial costs of a military strike might be a few hundred million dollars to pay for things like fuel, Harrison said.

That's a rounding error in the context of a defense budget that tops $500 billion annually.

In the next year or two, the cost could rise as the military seeks to replace the missiles and bombs it uses in Syria. One Tomahawk missile, for example, costs about $1.5 million.

But replacing even hundreds of them would only cost several hundred million -- again not a big dent in the overall defense budget.

(Opinion: Don't use Syria to pump up Pentagon spending)

Nor would it put the Pentagon at risk of violating the spending caps set under the so-called sequester.

That's because the sequester -- the automatic, across-the-board budget cuts that Congress criticized but failed to replace -- doesn't apply to a lot of spending for military actions. For example, supplemental funding to the defense "base" budget and money for "overseas contingency operations" are exempt from the sequester, Korb and Harrison noted.

The concern, of course, is that involvement in the Syrian conflict could morph into a years-long engagement.

"That's when the costs go through the roof," said Harrison.

But right now, any financial cost is unknowable, since it's unclear exactly what course of action the United States will take and what the outcome will be.

First Published: September 4, 2013: 9:33 AM ET

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Stocks: Markets cheer tech deals

Click chart for more markets data.

NEW YORK (CNNMoney)

With two deals set to transform the technology industry, traders saw reasons for optimism coming back after the summer stock market doldrums.

In the second-biggest merger ever, Verizon (VZ, Fortune 500) said it will pay $130 billion to take full control of Verizon Wireless, and Microsoft (MSFT, Fortune 500) said it was buying Nokia's (NOK) mobile phone business for $7.2 billion.

Takeover Tuesday helped pushed the Dow, S&P 500 and Nasdaq up between 0.5% and 1.2%.

Click here for more on stocks, bonds, commodities, and currencies.

However, investors had some reasons to remain wary, following reports of a ballistic missile launch in the eastern Mediterranean region, which revived concerns about a U.S.-led strike on Syria.

Israel's Ministry of Defense confirmed that Israeli forces and the U.S. Missile Defense Agency had carried out a missile test and said Israel would release further information about the launch soon.

European markets dipped slightly, while Asian markets ended between 1% and 3% higher.

Related: Wall Street is asleep: Volume at 5-year low

Manufacturing data in the U.S. came in above expectations, after better-than-expected manufacturing data was released in Europe and Asia over the long weekend.

Related: Fear & Greed Index

Buyers losing out: Investors didn't reward the two big buyers in the M&A market on Tuesday.

Shares of Microsoft dropped more than 4% following the deal, while Nokia's shares soared.

Verizon's stock dropped roughly 4% following the buyout.

End of cable drama: Investors like the agreement between Time Warner Cable (TWC, Fortune 500) and CBS (CBS, Fortune 500) to end a month-long blackout and restore CBS programming to about 3 million viewers, with both stocks rising.

First Published: September 3, 2013: 9:47 AM ET

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