... key producer regions, including South Africa and China. The brokerage said energy cost pressures and ... closed at $36.03 Wednesday on New York Stock Exchange. (Reporting by Jennifer Robin Raj in Bangalore; ...
Thursday, March 27, 2008
UPDATE 1-RESEARCH ALERT-UBS raises aluminum price forecasts
Forex - US dollar lower against yen in early Asian trade on weak US data
... > > > Forex - US dollar lower against yen in ... a shift to the safety of the Japanese currency. The US Commerce Department said Wednesday ... the release Tuesday of the Bank of Japans quarterly Tankan survey of business sentiment. Ten ...
Wednesday, March 26, 2008
Eight million shares contacts as ISX session opens
... Baghdad, 26 March 2008 (Voices of Iraq) -- Iraqs Stock Exchange (ISX) index decreased by 0.661 % to settle at 37.550 points at the closuring ...
Basra Calling
... world-wide newsbox all lead with the in Iraq as Shiite militias loyal to cleric Muqtada ... the midst of a " ." The stock market is at the same level it was ...
Forex - Euro rises on stronger-than-expected Ifo
... Forex - Euro rises on stronger-than-expected Ifo LONDON ... from 200.27 sfr 2.0082 down from 2.0190 Australian dollar usd 0.9154 down from 0.9157 stg ...
Depa to list on Dubai International Financial Exchange and London Stock...
... in Qatar, the Four Seasons Hotel in Egypt, the Four Seasons Hotel in Mumbai, India ... global depositary receipts (GDRs) on the London Stock Exchange plc (the Prospectus). Copies of the Prospectus ...
Toronto stocks set to cool, eyes on shaky buyouts
... TORONTO, March 26 (Reuters) - The Toronto Stock Exchanges main index was set to cool, but ... the collapse of blockbuster takeover talks between Anglo-Swiss miner Xstrata (XTA.L: U.S. stock futures, meanwhile, ...
Why Not Optimism?
... treaties. Schumer himself has spent years bashing China, threatening the nation with huge tariffs if ... available, even to small businesses. In the stock market, the best-performing sectors since the Jan. 22 ...
Pakistans political stability critical for the local market
... YORK (MarketWatch) -- The swearing in of Pakistans new prime minister Tuesday is a step ... 31%. The market capitalization of the Karachi Stock Exchange is about $75 billion, while Pakistans GDP ... indicates the enormous potential of the local stock market, Dzierwa said. Local retail investors dominate Pakistans ...
Tuesday, March 25, 2008
Nigeria: Guaranty Trust Bank Debuts in UK-Posts $750m GDR
... million of Global Depository Receipts (GDR) thereby becoming the first African bank and first Nigerian company to be listed on the main market of London stock exchange. In a statement by the Standard Times Press, the managing director of the bank, ...
KOSPI Could Be Higher Again On Tuesday
... hit five sessions for the South Korean stock market - and the global market continues to ... Copyright(c) 2008 RealTimeTraders.com, Inc. All Rights Reserved *Swiss Franc Inches Up Further To 98.91 Against ...
Heavy fighting in southern Iraqi oil hub
... news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Reuters ...
New Intel Server Processors: Fewer Watts, High Performance
... Calif., St. Albans, England, and St. Petersburg, Russia. For more information visit www.ARC.com. ARC International ... ARC International is listed on the London Stock Exchange as ARC International plc (LSE:ARK). ARC and ...
Riskmetrics recommendation
... Gold 25 March 2008 For immediate release Moscow, March 25, 2008 RiskMetrics Report Recommends against ... Gold (RTS, MICEX and LSE - PLZL), Russia's leading gold producer, today announced that RiskMetrics, ... The company news service from the London Stock Exchange Note 1 Company names will not be ...
Monday, March 24, 2008
Besa Sets Record for Bonds
... but Greubel said it would take another couple of months. One source said the JSE was opposed to the recapitalisation of the bond market and thought better market efficiencies ...
Korea military to adapt energy saving training
Commodity Online SEOUL: In an effort to save energy, South Korean military on Monday decided to introduce a new type of training in the face of record oil prices.
Gold prices decline but above 1 month lows
Commodity Online SINGAPORE: Gold prices declined but stayed above a 1 month low hit the previous day, while Tokyo\s precious metals futures tumbled amid declines in commodities markets.
Saturday, March 22, 2008
Why the Feds rate cuts wont help you
In its efforts to keep irresponsible bankers on Wall Street afloat, the Federal Reserve is spurring inflation, crippling the dollar and cutting into retirees incomes. And mortgages and car loans wont get any cheaper.
Wednesday, March 12, 2008
Wachovia says housing downturn nowhere near over
(Reuters) - Wachovia Corp (WB.N: Quote, Profile, Research), which offers adjustable-rate mortgages that let borrowers decide how much to pay each month, believes the U.S. housing downturn is far from over, Chief Risk Officer Don Truslow said.
"It feels like we have a ways to go," Truslow said on a Deutsche Bank Securities Inc conference call. Referring to the nine innings of a baseball game, Truslow said he was "unsure" whether the downturn was in the third, fourth or fifth inning, but "we haven't reached the seventh-inning stretch."
Charlotte, North Carolina-based Wachovia, the fourth-largest U.S. bank, on February 28 said it expected first-half loan losses to exceed 0.75 percent of loans on an annualized basis in 2008, higher than it had forecast two weeks earlier.
Liberty CEO says he was point man in IAC talks
(Reuters) - Liberty Media Chief Executive Greg Maffei said on Wednesday that he was the point man in talks with IAC/InterActiveCorp over disengaging the two companies despite a long-standing relationship between Liberty Chairman John Malone and IAC CEO Barry Diller.
"John Malone considered Barry Diller a friend" after a business partnership of nearly 12 years, Maffei told a Delaware court, where IAC and controlling shareholder Liberty are battling over a proposal to spin off four of IAC's businesses.
"While (Malone) was not entirely happy and increasingly unhappy with the performance at IAC ... because of the friendship, I don't think (he) was willing to tackle some of the issues," Maffei said. "I have been in effect the point person. I don't believe it's a personal matter."
Liberty's board put him in that role despite concerns of a potential conflict between Maffei and Diller. The two had clashed over IAC's purchase of online travel site Expedia several years before.
IAC and Liberty sued each other in January after Diller proposed a spinoff plan that would dilute Liberty's majority voting control over the businesses as separate entities.
The plan followed more than a year of inconclusive talks on a possible swap that would give IAC's HSN shopping network to Liberty in return for Liberty's stake in IAC.
Diller, a former television and film executive, built IAC with Malone's backing over more than a decade. While Liberty owns about 30 percent of IAC shares, it holds 62 percent voting control through a second class of super-voting stock.
GO Capital Halts Redemptions From Global Hedge Fund
(Bloomberg) -- GO Capital Asset Management BV blocked clients from withdrawing cash from its Global Opportunities Fund, at least the seventh hedge fund in the past month forced to take steps to protect itself from falling markets.
Frans van Schaik, the former head of equity research at ABN Amro Holding NV who founded the Amsterdam-based fund in 2000, wrote to investors that the fund is not leveraged and not facing margin calls. The fund, which bets both on rising and falling prices, has assets of about 570 million euros ($881 million).
``A temporary suspension of redemptions is the best defensive measure to protect the interests of the participants,'' van Schaik and other members of GO Capital's management said in a letter posted on their Web site and dated March 11. ``Current market circumstances do not allow the fund to sell investments at a reasonable price.''
At least six hedge funds totaling more than $5.4 billion have been forced to liquidate or sell holdings since Feb. 15 as contagion from the U.S. subprime slump spreads for a seventh month. Others include Peloton Partners LLP's $1.8 billion ABS Fund, Tequesta Capital Advisor's mortgage fund and Focus Capital Investors LLC, which invested in midsize Swiss companies.
GO focused mostly on listed European equities, although it was not restricted in investments it could make, the Web site says. The fund planned to make bets on between 10 and 30 stocks and looked for ``situations of overreaction or stress,'' according to the Web site.
U.S. Stocks Rise, Led by Industrials, on Caterpillar Forecast
(Bloomberg) -- U.S. stocks gained for a second day, extending the market's biggest rally in five years, after forecasts from Caterpillar Inc. and Bear Stearns Cos. spurred speculation that profits will rebound this year.
Caterpillar, the largest maker of bulldozers, rose the most in three months after saying emerging markets will boost sales. Bear Stearns, the second-biggest underwriter of U.S. mortgage bonds, climbed after Chief Executive Officer Alan Schwartz told CNBC the firm has enough money to weather market fluctuations.
The Standard & Poor's 500 Index increased 2.26 points, or 0.2 percent, to 1,322.91 at 10:44 a.m. in New York. The Dow Jones Industrial Average climbed 49.99, or 0.4 percent, to 12,206.8. The Nasdaq Composite Index added 9.1, or 0.4 percent, to 2,264.86. Four stocks gained for every three that fell on the New York Stock Exchange. Shares in Europe and Asia gained.
Industrial shares contributed the most to the rally after Caterpillar said machinery orders in emerging markets and efforts to improve public works in North America and Europe will boost sales.
Monday, March 10, 2008
Goldman says can't rule out Fed emergency rate cut
(Reuters) - An emergency interest rate cut from the Federal Reserve is possible ahead of its March 18th policy meeting, according to a Goldman Sachs research note on Monday.
Goldman said its view on Fed policy changed on Friday.
The government reported on Friday that a second straight month of job losses and the Fed announced new steps to inject liquidity into the financial system as credit availability remains tight.
Carlyle Capital Says Lenders May Force Further Sales
(Bloomberg) -- Carlyle Group's mortgage-bond fund said creditors may liquidate as much as $16 billion of securities unless the two sides reach agreement on debt repayments.
The fund has asked lenders to refrain from further sales after they liquidated collateral securing $5 billion of debt, Carlyle Capital Corp. said in a statement today. It is meeting lenders to discuss more than $400 million of margin calls and is ``evaluating all options,'' the Guernsey, Channel Islands-based fund said.
Carlyle Capital used loans to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac, which the firm says have an ``implied guarantee'' from the U.S. government. Even the safest mortgage bonds have slumped following the collapse of the subprime-mortgage market, leading to the failure of hedge funds led by Peloton Partners LLP.
``This particular Carlyle entity wasn't prepared,'' said Philip Keevil, a senior partner in London at Compass Advisers LLP and former head of European mergers at Salomon Smith Barney Inc. ``They hadn't started selling ahead of time and now they're having trouble liquidating their positions.''
Started by David Rubenstein 21 years ago, Carlyle expanded its mortgage investments last year, selling $300 million of shares in Carlyle Capital.
``Due to recent turmoil in the market for mortgage-backed securities, the company's lenders have significantly reduced the amount they are willing to lend against the company's portfolio of U.S. government agency AAA-rated residential mortgage-backed securities,'' Carlyle Capital said today.
Blackstone Profit Falls 89% on Credit Market Meltdown
(Bloomberg) -- Blackstone Group LP, manager of the world's largest buyout fund, said fourth-quarter profit plunged 89 percent after a ``meltdown'' in the credit markets and warned that getting loans for takeovers will be hard in 2008.
Profit excluding costs tied to its June initial public offering declined to $88 million, or 8 cents a share, from $808.1 million, or 72 cents, a year earlier, the New York-based company said today in a statement. Blackstone fell as much as 5.2 percent in New York trading as earnings missed analysts' estimates.
``Credit market problems persist and if anything have gotten worse,'' Blackstone President Tony James said on a conference call with reporters today. ``We're looking to 2009 before we see much of an improvement.''
Blackstone, which has lost 55 percent of its market value since the IPO, hasn't completed a takeover of more than $2 billion in five months as credit costs doubled and the LBO market shut down. It's struggling to close the $6.6 billion buyout of Alliance Data Systems Corp., the Dallas-based credit- card processor, announced in May.
Earnings were hurt by a decline in fees earned by completing acquisitions and a writedown of its investment in New York-based bond insurer Financial Guaranty Insurance Co. Blackstone invested $2.33 billion of capital in the quarter, down 31 percent from a year earlier.
Net Loss
``Among the risks are that LBO financing conditions continue to worsen and erode Blackstone's ability to earn sufficient private-equity returns,'' Bank of America Corp. analyst Michael Hecht wrote in a March 6 report to investors. Hecht, who is based in New York, cut his fourth-quarter estimate to 11 cents from 25 cents. The average estimate of seven analysts surveyed by Bloomberg was 20 cents a share.
Blackstone fell 55 cents, or 3.7 percent, to $14.03 at 10:17 a.m. in New York Stock Exchange composite trading. It earlier fell to $13.82, the lowest since the IPO.
Blackstone reported a fourth-quarter net loss of $170 million because of compensation costs tied to the IPO. Revenue rose 17 percent to $3.05 billion. The firm agreed to buy GSO Capital Partners LP for as much as $930 million in January to expand investments in distressed debt and leveraged loans.
``Despite the meltdown'' in credit markets, the company sees deal opportunities, especially in Asia, Chairman Stephen Schwarzman said in the statement.
Assets under management jumped 47 percent to $102.4 billion, driven by real estate, which doubled to $26.1 billion. Money-management assets rose 65 percent to $44.5 billion. Private-equity assets gained 7 percent to $31.8 billion.
Blackstone as Proxy
LBO financing evaporated last July as banks and investors pulled out of the market amid the fallout from rising subprime- mortgage delinquencies. The value of deals announced in the second half of 2007 plunged two-thirds from the first six months, according to data compiled by Bloomberg.
``We're a proxy for the credit markets,'' Blackstone President Hamilton James said at the Super Returns private equity conference in Munich on Feb 26.
Still, seven of the eight analysts who rate Blackstone recommend clients buy the stock, including Hecht. The other recommendation is a ``hold.''
Other publicly traded companies that make private-equity investments also have suffered. New York-based Fortress Investment Group LLC has fallen 58 percent in the past year, while 3i Group Plc of London has lost 42 percent.
Thursday, March 6, 2008
Gold's glitter lures buyers
(Reuters) - Gold's near vertical climb to historic highs approaching the key $1,000 mark shows no sign of abating as bullish forces such as a sinking dollar and record high oil are not seen fading anytime soon.
Fears that expensive oil will stoke inflation combined with worries over potential stock market losses and the U.S. on the brink of possible economic recession will propel gold higher still, analysts say.
"Don't be surprised to see gold trade up to $1,100 (an ounce) or even $1,200 before year-end 2008," said Jeffrey Nichols, managing director of American Precious Metals Advisors.
"And, with the right confluence of economic and geopolitical developments, we could see gold spike to $1,500 or even $2,000 in the next few years," he said.
Gold hit a record high of $991.90 an ounce on Thursday and was at $986.90/987.40 at 1144 GMT. It has jumped 20 percent this year, 56 percent in the past 12 months, doubled in about 2 years and surged from a low of around $250 in August 1999.
It was previously fixed at a record high of $850 in January 1980 as high inflation linked to strong oil, Soviet intervention in Afghanistan and the impact of the Iranian revolution prompted investors to heavily buy gold. After adjusting for inflation, the 1980 high was $2,119.30 at 2007 prices.
The market has ridden waves of investor buying, which lifted prices nearly 50 percent in the past six months, ignoring a handful of negative factors, with most players betting on even higher prices this year and next.
Money-Market Rate for Euros Climbs to Seven-Week High
(Bloomberg) -- The cost of borrowing euros for three months rose to the highest level in seven weeks as the coordinated effort by central banks to revive lending falters.
The euro interbank offered rate, or Euribor, for the loans climbed 3 basis points to 4.43 percent today, the highest since Jan. 17, the European Banking Federation said. It was the biggest gain since Jan. 25.
The increase in money-market rates adds to evidence a concerted plan by central banks to promote lending and limit the fallout from the U.S. housing slump isn't working. Banks' asset writedowns and credit losses exceeded $181 billion since the beginning of 2007, data compiled by Bloomberg show. Total writedowns may top $600 billion, UBS said last week.
``This will continue to be the story for all 2008,'' said Nathalie Fillet, a senior interest-rate strategist at BNP Paribas SA in London. ``It's less a pure liquidity squeeze like at the end of last year than a reflection that the global credit crisis will last a while.''
Borrowing costs fell earlier this year after policy makers from the U.S., U.K., euro region, Switzerland and Canada announced plans on Dec. 12 to counter the credit shortage. The ECB injected a record $500 billion into the banking system on Dec. 18. The Federal Reserve provided $160 billion in short-term loans since mid-December in six auctions through the Term Auction Facility.
OIS Spread
The difference between the rate banks charge for one-month dollar loans in London relative to the overnight indexed swap rate, the so-called Libor OIS spread used by the Fed as the minimum bid level at its auctions, suggested a decline in the availability of funds. The spread increased to 54 basis points today, from 30 basis points in the week ended Feb. 22. It averaged 6 basis points in the first half of 2007 and 41 basis points since then.
Overnight indexed swaps are derivatives in which one party agrees to pay a fixed rate in exchange for receiving the average of a floating central bank rate over the life of the swap. For swaps based in U.S. dollars, the floating rate is the daily effective federal funds rate.
The difference, or spread, between the three-month money- market rate and the European Central Bank's benchmark rate was 43 basis points. It averaged 25 basis points in the first half of 2007.
``The leverage crunch is unlikely to disappear over the next few weeks,'' Stuart Thomson, a money manager who helps oversee $46 billion in bonds at Glasgow, Scotland-based Resolution Investment Management Ltd., said in an e-mailed note today.
Ambac to Sell Half the Company, Bet May Not Pay Off
(Bloomberg) -- Ambac Financial Group Inc., the bond insurer seeking capital to salvage its AAA credit rating, will sell half the company in a bet some investors say won't pay off.
Ambac said yesterday it plans to issue $1 billion of common stock, more than doubling the number of shares outstanding. The New York-based company will also offer $500 million of units that convert to shares in 2011.
Investors had anticipated Ambac would be bailed out by banks, which would backstop a capital raising of as much as $3 billion, enough to overcome record losses on subprime-mortgage debt. Instead, the company announced it would raise half that amount in a transaction that would dilute existing shareholders, sending Ambac down 19 percent in New York Stock Exchange trading.
``The new offering is highly diluting to existing shareholders,'' Jim Ryan, an insurance analyst at Morningstar Inc. said in an interview with Bloomberg Television. ``The market was looking for a backstop, to say the least.''
The sale of common stock, managed by Credit Suisse Group, Citigroup Inc., Bank of America Corp. and UBS AG, is scheduled for tonight, according to data compiled by Bloomberg.
Ambac fell 26 cents to $8.44 in early New York Stock Exchange composite trading. The shares have tumbled 90 percent in the past year, reducing the company's market value to $884 million.
Abandoned Plan
By proposing a sale of common shares, Ambac is reverting to a plan it abandoned in mid-January. The company announced a $1 billion sale Jan. 16, sparking a 70 percent plunge in its stock, and canceled the offering Jan. 18.
Ambac cut its dividend to 1 cent from 21 cents a share and said it will suspend writing guarantees on debt, including mortgage-backed bonds. The combined plans will probably bolster capital enough for an AAA rating, Moody's and S&P said yesterday.
Stock investors were ``expecting something different in terms of some type of a more orchestrated event that looked less like a conventional offering of common stock and more like a carefully crafted infusion from business partners,'' said Colin Glinsman, who oversees about $25 billion as chief investment officer at Oppenheimer Capital in New York.
Credit-default swaps tied to Ambac's AAA rated insurance unit rose 38 basis points to 513 basis points from 475 basis points before the announcement, according to CMA Datavision in London. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
CDO Losses
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.
Ambac, its larger competitor MBIA Inc., and the rest of the industry stumbled after expanding beyond municipal insurance to guarantees on collateralized debt obligations that have since tumbled in value. Bond insurers with AAA ratings have guaranteed $2.4 trillion of debt.
The loss of Ambac's top rating would cast doubt on $556 billion of municipal and asset-backed securities insured by the company, forcing some investors to sell the debt and others to reduce their holdings.
Ambac, which pioneered municipal bond insurance in 1971, and the rest of the industry are reeling from their expansion into CDOs, which package pools of securities then split them into pieces with different ratings.
Tuesday, March 4, 2008
Staples Net Income Falls 1% on Lower Retail Sales
(Bloomberg) -- Staples Inc., the world's largest office-supplies retailer, said fourth-quarter profit fell 1 percent on lower North American retail sales to small companies and consumers.
Staples dropped in Nasdaq Stock Market trading.
Net income declined to $333.2 million, or 47 cents a share, from $336.5 million, or 46 cents, a year earlier, Staples said today in a statement. Profit met some analysts' estimates. Revenue for the three months ended Feb. 2 rose less than 1 percent to $5.32 billion. Staples cut its full-year forecast.
Sales at U.S. and Canadian stores open at least a year dropped 6 percent. Office-supply retailers' sales slowed as customers concerned about a declining job market and the worst housing slump in a quarter century reduced purchases of copiers and desks. North American sales have also declined at smaller competitors such as Office Depot Inc.
``The environment is hitting everyone pretty hard,'' Walter Todd, who helps manage $800 million for Greenwood Capital Associates LLC in Greenwood, South Carolina, said yesterday in an interview. ``It's all macro-driven.'' The firm held 175,048 Staples shares as of Dec. 31.
The retailer predicted a ``mid single-digit'' percentage increase in sales and ``high single-digit'' percentage growth in earnings per share for the year ending next Jan. 31. Staples said in November that it expects earnings per share this year to increase by a percentage in the ``low teens,'' with ``high single-digit'' sales growth.
Staples Stock
Staples, based in Framingham, Massachusetts, fell 54 cents, or 2.4 percent, to $21.95 at 9:44 a.m. in Nasdaq Stock Market composite trading. The stock lost 2.5 percent of its value this year through yesterday, compared with a 20 percent decline for Office Depot, the second-largest office-supplies retailer.
``In the context of a tough retail environment, we view Staples as relatively stable,'' Jack Murphy, an analyst at William Blair & Co. in Chicago, wrote yesterday in a research note. He rates Staples shares a ``buy.''
Analysts estimated fourth-quarter profit of 47 cents a share, the average projection of 16 analysts surveyed by Bloomberg. Eleven analysts, on average, estimated sales of $5.4 billion.
In November, Staples forecast a ``low double-digit'' sales growth in the fourth quarter, with North American same-store sales unchanged or ``slightly negative.''
Canada Cuts Rate a Half Point, Signals More Is Needed
(Bloomberg) -- The Bank of Canada cut its benchmark interest rate a half point, the first such move since 2001, and signaled it will have to act again to offset a slump in exports to the U.S.
Mark Carney, in his first decision as governor, cut the target rate for overnight loans between commercial banks to 3.5 percent, the lowest since March 2006. Thirteen of 26 economists surveyed by Bloomberg News predicted the move.
``Further monetary stimulus is likely to be required in the near term,'' the central bank said today in a statement from Ottawa. Signs of economic slowdown in Canada are ``materializing and, in some respects, intensifying.''
Tumbling exports to the U.S. will limit 2008 economic growth to a seven-year low of 1.8 percent, the central bank says, and have erased the country's broad trade surplus for the first time since 1999. The bigger rate cut today also helps catch up with moves this year by the U.S. Federal Reserve, and may slow the Canadian dollar's advance that has battered manufacturers.
``There are clear signs that the U.S. economy is likely to experience a deeper and more prolonged slowdown than had been projected,'' which will have ``significant spillover effects on the global economy,'' the Bank of Canada said today.
Canada's decision comes two days before meetings of the Bank of England, and the European Central Bank, where economists predict policy makers will keep rates unchanged.
Further Cuts
``With further rate cuts clearly needed to insure against the downside risks from a rapidly softening U.S. economy, and since monetary policy acts with a lag, we see no reason for the Bank of Canada to wait,'' Jacqui Douglas, economics strategist at TD Securities in Toronto, said before the decision.
The Fed is expected to cut borrowing costs again on March 18. Canada's benchmark is now half a point greater than that of the U.S., narrowing what was the biggest gap since June 2004. That premium has helped keep Canada's currency close to a record high.
The currency rose to a record 90.58 Canadian cents per U.S. dollar on Nov. 7 and has gained 26 percent in three years. Today it weakened 0.3 percent to 99.32 Canadian cents per U.S. dollar at 9:19 a.m. in Toronto.
Canada sends about three-quarters of its exports to the U.S., making the two countries the world's biggest trading partners, and the high dollar makes those goods less competitive. The U.S. economic woes have sapped demand for Canadian lumber and automobiles, two of the five biggest exports.
Monday, February 25, 2008
Recovery may take longer than usual: Greenspan
(Reuters) - Economic growth has stalled and recovery may take longer than usual, former Federal Reserve chairman Alan Greenspan said on Monday.
"As of right now, U.S. economic growth is at zero," Greenspan said at an investment conference in Jeddah, Saudi Arabia's second-largest city. "We are at stall speed."
"Recovery might take longer to emerge than it usually does," he added.
The longer growth stays at zero, the more likely the world's largest economy would start to contract, he said, adding that globalization of trade could ease some shocks.
"Growing globalization of trade and the economy would facilitate the absorption of shocks in the U.S.," he said.
In updated economic forecasts released last week, the U.S. central bank lowered its outlook for 2008 growth by a half percentage point to between 1.3 percent and 2 percent, citing the prolonged housing slump and bottlenecks in credit markets.
Dresdner Bank says to support Ambac rescue
(Reuters) - Dresdner Bank, part of the Allianz (ALVG.DE: Quote, Profile, Research) insurance group, intends to support a rescue package for U.S. bond insurer Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) with a sum in the low double-digit millions of euros, the head of Dresdner's investment banking operations said on Monday.
Various rescue options for Ambac were now under discussion, Stefan Jentzsch told reporters. "If what is now on the table comes to pass then we will take part in the package," he said.
Citigroup May Post First-Quarter Loss, Whitney Says
(Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, may post its second-straight quarterly loss because of writedowns on home-equity loans and junk-grade corporate loans, Oppenheimer & Co.'s Meredith Whitney said.
The bank may post a loss of $1.6 billion, or 28 cents a share, for the first quarter, compared with a profit of about $5 billion, or $1.01, a year earlier, Whitney wrote today in a note to clients. The prediction compares with the 63-cents per share average of 12 analyst estimates surveyed by Bloomberg.
The rate of loan losses is ``grossly underestimated by consensus estimates'' at Citigroup and other U.S. banks, Whitney wrote. ``Core fundamentals are rapidly deteriorating.'' She cut her per-share estimate for 2008 earnings by more than 70 percent to 75 cents. The New York-based company's shares could fall more than 36 percent to less than $16, she wrote. They've declined about 15 percent this year.
Citigroup posted a $9.8 billion loss for the fourth quarter, the widest in its 196-year history, after writing down subprime mortgage-linked collateralized debt obligations whose value plummeted last year as investors shunned securities linked to the least creditworthy borrowers. Vikram Pandit stepped in as chief executive officer in December, after Charles O. ``Chuck'' Prince was forced to resign.
Whitney was among the first analysts to gauge the depth of Citigroup's losses, writing in a note last October that the bank may have to cut dividend payments to shareholders for the first time since the 1990s. In January, the bank slashed its dividend by 41 percent, reversing a pledge made by its executive- committee chairman, former U.S. Treasury Secretary Robert Rubin, to preserve the shareholder payout.
Thursday, February 21, 2008
SocGen in record loss, may take new writedowns
(Reuters) - Societe Generale (SOGN.PA: Quote, Profile, Research) confirmed a record fourth-quarter loss of 3.35 billion euros ($4.93 billion) after absorbing a huge rogue trading scandal that has made France's second-biggest listed bank a potential takeover target.
The loss coincided with an internal report acknowledging that better systems might have prevented the costly stock market gambles it blames on junior trader Jerome Kerviel.
SocGen, like many of the world's top banks, has also been hit by losses related to a global credit crunch and the bank warned it may make further writedowns in the future.
Executive Chairman Daniel Bouton told Reuters the 144-year-old firm was determined to ride out the storm as an independent bank, despite reports of a potential bid from long-time suitor and arch-rival BNP Paribas (BNPP.PA: Quote, Profile, Research).
"I am completely determined to continue with our strategy because, even taking into account our very bad year in 2007 due to the financial crisis and this fraud, it's this strategy which creates and will create the most value for shareholders," Bouton said in an interview. "This is my opinion, and it's one that's backed by the board."
SocGen's fourth-quarter net loss compared with a 1.18 billion euro profit a year earlier and a fourth-quarter profit of 1.0 billion euros unveiled by rival BNP Paribas, although BNP Paribas' results were down from the year before.
SocGen cut its 2007 dividend to 0.90 euro from 5.20 euros.
Reed to buy ChoicePoint, sell info division
(Reuters) - Reed Elsevier announced the acquisition of U.S. risk-management business ChoicePoint Inc for $4.1 billion including debt alongside its results, as well as a renewed cost-savings drive and the planned sale of an advertising-dependent information business.
Shares in Anglo-Dutch publisher Reed, which have outperformed the DJ Stoxx European media sector by 5 percent over the past year, jumped 6 percent to 619 pence on the news on Thursday.
The $4.1 billion for ChoicePoint comprises $3.5 billion in cash for the equity, at $50 per share, and 600 million pounds in debt. CheckPoint shares closed at $33.66 on Wednesday.
Reed said that combining ChoicePoint with its LexisNexis risk-information and its Analytics group would create a risk-management business with $1.5 billion in revenue and a leading position in a fast-growing market.
The London-based company said buying ChoicePoint had the unanimous backing of the U.S. company's board and now required shareholder and regulatory approval. ChoicePoint is based in Alpharetta, Ga. and employs around 5,500 people.
Reed also announced that it would divest its Reed Business Information (RBI) arm to reduce its exposure to cyclical advertising markets. The Reed exhibitions business will be kept.
Advertising accounts for around 60 percent of revenues at RBI, which itself generates around 20 percent of Reed's 4.6 billion pound group revenues.
UBS to Shorten Ospel Term to One Year at Re-election
(Bloomberg) -- UBS AG said it would reduce Chairman Marcel Ospel's next term of office to one year from three after Europe's largest bank by assets reported a record loss.
Ospel, 58, was a force behind the merger of Swiss Bank Corp. and Union Bank of Switzerland that created UBS in 1998 and has been chairman for seven years. UBS posted a 12.5 billion-franc ($11.4 billion) fourth-quarter loss after an expansion into debt trading led to writedowns when the U.S. housing market slumped.
``Shareholders have a lack of confidence and that is linked to Ospel's name,'' said Vinzenz Mathys, an analyst at the Ethos Foundation, an investor in UBS calling for a special audit of the bank's risk controls. ``We are disappointed because UBS could have proposed new candidates.''
Shareholders will vote on re-electing Ospel and two other board members to shortened terms at the annual general meeting on April 23, Zurich-based UBS said in an e-mailed statement today. Sergio Marchionne, Fiat SpA's chief executive officer, was named a non-executive vice chairman.
UBS's losses already led to the departures of former CEO Peter Wuffli, 50, his finance chief Clive Standish, 54, and Huw Jenkins, 50, who ran the investment bank.
``It will take at least a year, if not longer, to clean up things at UBS and Ospel being around means there will be no clean cut with mistakes of the past,'' said Ralf Rybarczyk, who manages 1.5 billion francs at DWS Investment GmbH, including UBS shares.
`Current Challenges'
Peter Voser, finance director at Royal Dutch Shell Plc, and Larry Weinbach, the former chairman of Unisys Corp., will also stand for re-election to one-year board terms at the annual meeting, UBS said. Voser, 49, will take over from Weinbach, 68, as chairman of the audit committee. In subsequent elections, all board members will be elected for one year, the company said.
Marchionne, 55, was named non-executive vice chairman to replace Marco Suter, 49, who was an executive vice chairman before taking on the role of chief financial officer in October. Italian newspaper MF reported on Feb. 15 that Marchionne was a possible replacement for Ospel, which the Fiat executive denied. He said in a statement today his new role is ``absolutely compatible'' with running Fiat.
``With these moves we have strengthened the leadership structure in order to manage UBS's current challenges,'' Ospel said in the statement. ``I proposed the new tenure rule to the board, and am prepared, pursuant to their request, to stand for re-election for one year.''
UBS rose 48 centimes, or 1.3 percent, to 36.80 francs by 2:08 p.m. in Swiss trading. The stock has fallen 30 percent this year, the fourth-worst performance on the 60-member Bloomberg Europe Banks and Financial Services Index.
Microsoft to Change Technology Practices in Bid to Appease EU
(Bloomberg) -- Microsoft Corp., the world's biggest software maker, announced a series of changes in its technology and in how much information it gives developers about its products, in a bid to satisfy European regulators.
Wednesday, February 20, 2008
KKR Financial Delays Repayments, Starts Negotiations
(Bloomberg) -- KKR Financial Holdings LLC, Kohlberg Kravis Roberts & Co.'s only publicly traded fixed-income fund, delayed repaying debt a second time in six months after failing to find buyers for commercial paper backed by mortgages.
Lenders to the fund agreed to the delay as KKR Financial seeks to restructure, the San Francisco-based company said yesterday in a regulatory filing. KKR Financial, whose stock has fallen 50 percent in the past year, didn't say how much debt is affected.
The announcement rekindled concerns that the decline in the market for short-term asset-backed debt, which totaled $1.2 trillion in August, will accelerate after a rebound early last month. Assets fell to $796 billion in the week ended Feb. 13, the third weekly drop. Standard & Poor's downgraded ratings on notes issued by KKR Pacific Funding Trust last week, citing uncertain pricing on the AAA rated securities that support them.
``The picture is getting worse and worse,'' said Felix Freund, who helps manage the equivalent of $14.7 billion of fixed-income securities at Frankfurt-based Union Investment GmbH. KKR Financial's second repayment extension ``shows there is still a lot of levered investments in the credit market that we can't see.''
About half the debt will be due by March 3 instead of Feb. 15, with the rest owed on March 25, according to the filing.
The talks come less than six months after the fund received a $230 million cash infusion from investors following losses on residential mortgages in the wake of the U.S. subprime crisis. The fund, led by Chief Executive Officer Saturnino Fanlo, raised a further $270 million in a rights offering with some of New York-based KKR's own partners buying shares in it, which had $19 billion of assets at the end of December.
Repricing `Driver'
The deferral drove investors to seek the security of government debt, sending 10-year Japanese bonds to the biggest gain in two weeks while perceived corporate risk in Asia and Europe soared. Contracts on Europe's Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 26.5 basis points to 611.5 today, according to Deutsche Bank AG. A basis point is 0.01 percentage point.
``The driver behind the current repricing is KKR Financial Holdings delaying repayment of CP for the second time,'' analysts led by Mark Harmer, head of credit research at ING Groep NV, said in a note to clients today.
KKR Financial fell 30 cents, or 2.1 percent, to $14.23 at 11:44 a.m. in New York Stock Exchange composite trading. Zoe Watt, a spokeswoman for KKR in London, declined to comment.
IPO
Kohlberg Kravis Roberts, the New York-based investment firm run by Henry Kravis and George Roberts, raised $800 million in KKR Financial's initial public offering in June 2005, selling the shares for $24 apiece. The fund raised money by selling commercial paper to invest in mortgages. It sold almost half of its mortgage loans in August as prices on bonds linked to U.S. home loans started to drop, leaving it with about $5.3 billion of mortgages.
Both Kravis and Roberts sit on KKR Financial's six-member investment committee, alongside KKR Partner Scott Nuttall, KKR Financial's Fanlo and Chief Operating Officer David Netjes.
Kravis and Roberts started the firm with Jerome Kohlberg, their colleague from Bear Stearns Cos., in 1976. Kohlberg left in 1987 and started his own buyout group, Kohlberg & Co. LLC. The private-equity business owns more than 42 companies with more than $180 billion of annual revenue and about 800,000 workers around the world. The firm's investments range from Alliance Boots Ltd. in the U.K. to Texas power producer TXU Corp., now known as Energy Future Holdings Corp.
U.S. Economy: Housing Slump Fails to Quell Inflation
(Bloomberg) -- The two-year housing slump pushing the U.S. economy toward a recession hasn't alleviated inflation pressures, reports today showed.
Consumer prices rose 0.4 percent from December, with costs excluding food and energy climbing 0.3 percent, the most since June 2006, the Labor Department said. Builders started work on 1.012 million homes at an annual rate in January, close to a 16- year low, the Commerce Department reported in Washington.
The figures mean Federal Reserve Chairman Ben S. Bernanke will need to consider raising interest rates as soon as the economy stabilizes. Bernanke, who last week said the Fed is prepared to keep lowering interest rates, warned that faster inflation would ``greatly complicate'' the central bank's job.
``What this means is that they don't have as much comfort to play with rates,'' Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said on Bloomberg Television, referring to Fed officials. ``Once the U.S. economy looks like it's started to stabilize, they're going to have to jump right back in to that, raising rates back up to neutral.''
Treasury securities slumped after the consumer price report, while recouping most of the losses later. Ten-year note yields increased to 3.93 percent at 9:54 a.m. in New York from 3.90 percent late yesterday. The Standard & Poor's 500 stock index lost 0.8 percent, to 1,337.97.
Lowest Since 1991
Building permits, an indication of future construction, fell 3 percent to a 1.048 million rate, the lowest level since November 1991, today's Commerce report showed.
Housing starts were projected to rise to a 1.01 million pace from an originally reported 1.006 million rate in December, according to the median forecast in a Bloomberg survey of 72 economists. Permits were forecast to drop to a 1.05 million rate, from 1.068 million in December.
``We don't think housing has hit bottom yet,'' said Douglas Porter, deputy chief economist at BMO Capital Markets in Toronto. ``Until we get some stabilization in sales or even a mild improvement, it's likely that construction will continue to weaken.''
A jump in food and energy costs, rents and clothing prices led the consumer-price index higher last month. Economists had forecast a 0.3 percent increase, with the so-called core rate gaining 0.2 percent, Bloomberg surveys showed.
Today's price report ``certainly showed a broad-based intensification of inflation pressures,'' said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. While the Fed currently ``is looking at growth,'' inflation ``will come back on the radar screen'' when economic data improve, he said.
Food Costs
Food prices, which account for about one-seventh of the CPI, rose 0.7 percent, matching the biggest gain since May 2004, after a 0.1 percent increase in January. Energy prices last month increased 0.7 percent, after rising 1.7 percent the previous month.
``Even if energy prices remain flat, the continued rise in retail food prices will damp consumer spending growth,'' JPMorgan Chase & Co. economists wrote in a note to clients last week.
Fuel costs were up 4.5 percent. Apparel prices rose 0.4 percent after a 0.1 percent increase in December.
The consumer price index is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.
Tuesday, February 19, 2008
Bernanke Turns Notes Into Losers as Refinancing Rises
(Bloomberg) -- The more Federal Reserve Chairman Ben S. Bernanke cuts interest rates, the less appealing 10-year Treasuries become to investors like Doug Dachille, chief executive officer of First Principles Capital Management LLC.
Consumers taking advantage of lower borrowing costs have pushed the Mortgage Bankers Association's refinancing index to its highest level since March 2004. Ten-year notes fell 4.83 percent in April 2004 as the extra cash homeowners pocketed from replacing high-rate loans spurred bigger gains in retail sales and consumer confidence than forecast.
As then, a drop in rates may help ease the burden of consumers' monthly payments and contribute to forecasts of a rebound in the economy, diminishing the appeal of government debt. The price of the 10-year note has fallen 3.15 percent since Jan. 23, according to Merrill Lynch & Co. index data, and St. Louis Fed President William Poole said Feb. 11 that ``the best bet is that we will not have a recession.''
``There is no reason for people to bring the 10-year note yield down,'' said Dachille, 43, who manages $7 billion in assets at New York-based First Principles. Given that ``the Fed is cutting rates and the administration is providing a stimulus package, you'd expect that over the next two or three years the economy will recover.''
Policy makers slashed their target rate for overnight bank loans by 2.25 percentage points to 3 percent between Sept. 18 and Jan. 30. Bernanke indicated last week that he's prepared to cut rates further to revive the economy and encourage banks to lend.
Yields Climb
``More-expensive and less-available credit seems likely to continue to be a source of restraint,'' Bernanke told the Senate Banking Committee on Feb. 14. The Fed ``will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,'' he said.
Ten-year note yields rose 12 basis points, or 0.12 percentage point, to 3.77 percent last week, according to New York-based bond broker Cantor Fitzgerald LP. The price of the 3 1/2 percent security due in February 2018 fell 31/32, or $9.69 per $1,000 face amount, to 97 25/32. The yield climbed 9 basis points to 3.86 percent as of 9:19 a.m. in New York.
Yields are up from a low this year of 3.285 percent on Jan. 23, the day after the Fed reduced rates between policy meetings for the first time since the September 2001 terrorist attacks. They will rise to 3.89 percent by year-end, according to the median forecast of 65 economists in a Bloomberg News survey that puts a higher weighting on the most recent estimates.
A separate poll shows growth will likely accelerate to a 2.5 percent annual rate in the final three months of the year from 0.6 percent last quarter.
Past as Prologue
Mortgage refinancing applications soared ninefold between July 2001 and May 2003, according to the Mortgage Bankers trade group in Washington. The yield on the 10-year Treasury rose to 4.65 percent in the following 12 months from 3.37 percent.
The MBA's refinancing index surged to 5,103.60 on Jan. 25, its highest level since June 2003, from 1,620.90 in the week ended Dec. 28, 2007. The average rate on a 30-year fixed loan fell to 5.48 percent on Jan. 24, according to Freddie Mac. That means a homeowner would save $81.40 a month on every $100,000 borrowed now compared with June, when rates rose to 6.74 percent.
The rise in refinancings may be skewed by borrowers submitting multiple applications for loans as bankers tighten lending standards, according to Joseph Mason, an associate professor of finance at Drexel University in Philadelphia.
`Restricting Access'
``I don't see a housing market recovery right now,'' said Mason, 43, who predicts Treasury yields will fall as investors continue to buy the debt as a haven from losses in higher risk markets. ``People can't get a mortgage'' because ``banks are restricting access to credit,'' he said.
Declining property values are also making it harder for a growing number of homeowners to refinance. By year-end as many as 15 million households may owe more on their mortgages than their homes are worth, according to an estimate from Jan Hatzius, chief U.S. economist of New York-based Goldman Sachs Group Inc.
Even so, the drop in rates is helping homeowners with subprime adjustable-rate mortgages. Most of those loans are tied to the six-month London interbank offered rate, which has declined to 2.96 percent from last year's peak of 5.86 percent in September.
The decline in Libor will probably reduce scheduled increases through 2010 in subprime borrowers' payments to 8 percent on average, or $182, according to analysts at Wachovia Corp. in Charlotte, North Carolina. During August, the rise in Libor pointed to increases of 33 percent on average.
U.S. Stocks Rise, Led by Energy Companies; European Shares Gain
(Bloomberg) -- U.S. stocks rose, led by energy and mining companies, after oil gained for the seventh time in eight days and copper climbed to a four-month high.
Exxon Mobil Corp., the biggest U.S. fuel company, and Freeport-McMoRan Copper & Gold Inc., the world's second-largest copper producer, advanced. Wal-Mart Stores Inc., the biggest retailer, increased after fourth-quarter profit topped analysts' estimates. Rallies in raw-materials producers lifted Asia's stock benchmark to a two-week high, while European shares rebounded from earlier losses as insurers rose.
The Standard & Poor's 500 Index added 14.13 points, or 1.1 percent, to 1,364.12 as of 9:41 a.m. in New York. The Dow Jones Industrial Average rose 121.63, or 1 percent, to 12,469.84. The Nasdaq Composite Index gained 22.46, or 1 percent, to 2,344.26. The U.S. market was closed yesterday for Presidents' Day.
``The general earnings picture is quite good,'' said Lincoln Anderson, the Boston-based chief investment officer of LPL Financial Services, which helps oversee about $271 billion. ``U.S. stocks are sort of on sale.''
Fourth-quarter profit for the S&P 500's 412 members that have reported results dropped by an average 19 percent, data compiled by Bloomberg show. Excluding financial companies, earnings climbed 18 percent. The S&P 500 trades at 13.9 times its members' estimated 2008 profit, based on analysts' projections compiled by Bloomberg. Index members last traded at a valuation of less than 14 times historic earnings in 1990.
Weekly Gain
The S&P 500 rose last week for the third time in a month after the biggest jump in oil since November lifted energy producers, and earnings from consumer companies exceeded analysts' estimates.
The MSCI Asia Pacific Index gained 1.6 percent today to a two-week high as Rio Tinto Group said it's seeking a bigger price increase for its iron ore from steelmakers than the 65 percent obtained by a rival.
Europe's Dow Jones Stoxx 600 Index rose 0.9 percent after earlier declining as much as 1.3 percent. A gauge of insurers added 2.1 percent for the biggest gain among 18 industry groups.
Staples in 2.5 bln euro offer for Corp. Express
(Reuters) - U.S. office goods supplier Staples proposed a 7.25 euros per share offer for Dutch peer Corporate Express on Tuesday, valuing the company at around 2.5 billion euros ($3.68 billion).
Ending months of speculation about a possible bid, Staples said its all-cash offer represented a premium of around 67 percent to Corporate Express' closing price of February 4. Shares in Corporate Express jumped 33 percent on the news.
Corporate Express, one of the world's largest office products wholesalers, has been under pressure from hedge funds to put itself up for sale after losses in the United States, its key market. It was not immediately available to comment.
"Staples has high regard for the Corporate Express management team, and believes together our combined companies will create significant opportunities for all stakeholders," said Ron Sargent, Staples chairman and chief executive.
Monday, February 18, 2008
Exxon open to Venezuela talks, ready to fight
(Reuters) - Exxon Mobil (XOM.N: Quote, Profile, Research) is ready to talk to the Venezuelan government to settle a dispute over the forced acquisition of its oilfields, after gaining a court order to freeze $12 billion of Venezuelan assets, a senior executive said on Monday.
But the U.S. oil major said it was also prepared to fight to assert its interests if it has to.
"We have indicated to the Venezuelan government that we're still prepared to talk, but should that not be the case, we'll protect our rights," Robert Olsen, chairman of Exxon Mobil International told Reuters in an interview at the sidelines of the International Petroleum Week conference in London.
Leftist President Hugo Chavez told foreign oil companies last year to cede a majority stake in oil projects or leave the country.
Most agreed and accepted bids for stakes in their projects from state oil company PDVSA, bids that analysts said were below market value.
But Exxon and rival oil major ConocoPhillips (COP.N: Quote, Profile, Research) opted to pull out rather than give in to government demands.
Olsen, who is also head of production for Europe, the Caspian and Russia, told the conference that resource-holding governments should stick to the terms they agree with foreign investors.
Fed's Lower Rates Pressure China to Strengthen Yuan
(Bloomberg) -- Like it or not, China has no choice other than to let the yuan appreciate against the dollar.
The combination of the world's fastest economic growth, the highest inflation rate in 11 years and the rising cost of intervention will force gains in the yuan to accelerate, even as policy makers in Beijing resist calls from the West to let the currency appreciate at a faster pace, say Pacific Investment Management Co. and Pictet & Cie., Switzerland's largest closely held private bank.
Central bankers in Thailand, Malaysia, Singapore and the Philippines are in the same situation, making their currencies attractive, according to money managers at the firms and Merrill Lynch & Co. Nine of the 10 best-performing currencies against the dollar in 2008 will come from Asia, surveys of foreign exchange strategists by Bloomberg show.
``You're likely to see less intervention,'' said Ramin Toloui, who helps oversee more than $60 billion in emerging- market bonds and currencies at Newport Beach, California-based Pimco. ``Several Asian central banks see more rapid exchange- rate appreciation as an important tool to fight inflation.''
After rising 7 percent last year, the yuan has appreciated 1.9 percent to 7.1623 per dollar so far in 2008. New York-based JPMorgan Chase & Co., the world's ninth-biggest currency trader, predicts a further 14 percent increase, while Citigroup Inc. in New York, the third-largest, forecasts a 6 percent advance.
Thailand's baht has climbed 3.7 percent to 32.53 this year, while the Taiwan dollar is up 2.4 percent to NT$31.75. The yuan rose 0.3 percent today, the most in six weeks, and the Singapore dollar gained as much as 0.2 percent to S$1.4107, its highest in more than a decade.
Inflation Battle
While the International Monetary Fund expects growth in Asian emerging markets will slow to 8.6 percent in 2008 from 9.6 percent last year, that's still six times faster than the 1.5 percent expansion predicted for the U.S.
Consumer prices in the region's 10 largest economies outside Japan are rising at an average annual rate of 5.30 percent, compared with 4.10 percent in the U.S., data compiled by Bloomberg show. Faster inflation raises the odds that central banks in Asia will increase interest rates, bolstering the appeal of their currencies.
``We are long Asian currencies,'' said Donald Amstad, head of Asia-Pacific fixed-income at Aberdeen, Scotland-based Aberdeen Asset Management Plc, which oversees $205 billion. ``Asia is in relatively better shape than the rest of the world.'' A ``long'' position is a bet that a currency will gain.
Costly Option
To keep their currencies from appreciating too fast and hurting exporters, Asian central banks have bought U.S. dollars, accumulating $4 trillion in foreign-exchange reserves.
The downside to intervention is that it increases the supply of the local currency, which tends to fuel inflation. To prevent that from happening, Asian central banks typically sell bonds to remove those funds from the economy.
That option has become more costly because interest on the debt is paid with income from its reserves, which are invested in dollar-denominated securities. The People's Bank of China pays 1.31 percentage points more on its six-month bills than it earns on similar-maturity Treasuries following the U.S. Federal Reserve's five rate cuts since September. Six months ago, the spread was 2.2 percentage points in favor of U.S. debt.
Bayer, Onyx Stop Cancer Trial on Higher Death Rate
(Bloomberg) -- Bayer AG, Germany's biggest drugmaker, and U.S. partner Onyx Pharmaceuticals Inc. stopped a late-stage test of their Nexavar cancer drug in lung tumors because of a higher death rate among some of the patients.
An independent committee that monitors trials advised the companies that the treatment wouldn't meet the main goal of the test, Leverkusen-based Bayer said today in a statement on PRNewswire.
Friday, February 15, 2008
Best Buy Cuts Forecast, Citing Fourth-Quarter Sales
(Bloomberg) -- Best Buy Co., the largest U.S. consumer electronics chain, cut its full-year earnings forecast to $3.05 to $3.10 a share, saying fourth-quarter revenue will fall short of targets.
The company had previously predicted earnings per share of $3.10 to $3.20 for the year ending March 1, Richfield, Minnesota- based Best Buy said in a statement today. Analysts surveyed by Bloomberg estimated $3.17 a share on average.
``Soft domestic customer traffic in January, coupled with our near-term outlook, now indicate that our fourth-quarter revenue will fall short of our planned targets,'' Chief Executive Officer Brad Anderson said in the statement. ``Our December revenue results were in line with our expectations.''
Thursday, February 14, 2008
Comcast, Pressured by Holders, Sets Buyback, Dividend
(Bloomberg) -- Comcast Corp., the cable-TV operator pressured to boost investor returns, said it will buy back $6.9 billion of its stock over two years and pay its first dividend in almost a decade, sending the shares up the most in five years.
Fourth-quarter net income rose 54 percent to $602 million, or 20 cents a share, from $390 million, or 13 cents, a year earlier, Philadelphia-based Comcast said today in a statement. Profit beat the 17-cent average of 17 analysts' estimates compiled by Bloomberg. Sales gained 14 percent to $8.01 billion.
The buyback and annual dividend of 25 cents followed criticism from investors including Chieftain Capital Management Inc., who said Comcast's acquisitions and capital spending were excessive. Last month, Chieftain called for Comcast to reward shareholders and oust Chief Executive Officer Brian Roberts.
``Investors had been looking for a return of cash,'' Sanford C. Bernstein & Co. analyst Craig Moffett said in an interview on Bloomberg Radio. ``That signals confidence from the management that they really do believe that capital intensity is going to fall. We got that this morning in a big share repurchase.''
Moffett, based in New York, rates the stock ``outperform.''
Comcast rose $1.26, or 7.1 percent, to $19.07 at 9:32 a.m. New York time in Nasdaq Stock Market trading, after gaining as much as 7.2 percent, its biggest rise since October 2002. The stock had declined 35 percent in the past year before today.
The company may increase its dividend ``over time,'' co- Chief Financial Officer Michael Angelakis said on a conference call.
UBS Won't Support Failing Auction-Rate Securities
(Bloomberg) -- UBS AG won't buy auction-rate securities that fail to attract enough bidders, joining a growing number of dealers stepping back from the $300 billion market, said a person with direct knowledge of the situation.
The second-biggest underwriter of the securities, whose rates are reset periodically at auctions, notified its 8,200 U.S. brokers of the decision yesterday, said the person, who declined to be identified because the announcement wasn't publicly disclosed. Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Citigroup Inc. allowed auctions to fail as mounting losses from the collapse of subprime mortgages causes capital markets to seize up.
Bank of America Corp. estimated in a report that 80 percent of all auctions of bonds sold by cities, hospitals and student loan agencies were unsuccessful yesterday. That may mean as much as $20 billion of bonds failed to find buyers, based on the $15 billion to $25 billion of auction-rate bonds scheduled for bidding daily, according to Alex Roever, a JPMorgan Chase & Co. fixed income analyst.
``We are kind of in uncharted territory right now,'' said Anne Kritzmire, a managing director for closed-end funds at Nuveen Investments in Chicago.
Auctions are failing as confidence in the creditworthiness of insurers backing the securities wanes, and as loss-plagued banks seek to avoid tying up their capital. More than 129 auctions failed yesterday, Kritzmire said.
Four-Fifths Fail
Rohini Pragasam, a spokeswoman for UBS, the second-biggest underwriter of municipal auction-rate debt after Citigroup in 2006 according to Thomson Financial, declined to comment. UBS, the dealer on the hospital corporation's auction, today posted the biggest-ever loss by a bank for the fourth quarter. The stock declined 2.34 francs ($2.12), or 5.7 percent, to 38.54 francs at 3:18 p.m. in Zurich.
Auction bonds have interest rates determined by bidding that typically occurs every seven, 28 or 35 days. When there aren't enough buyers, the auction fails and bondholders who wanted to sell are left holding the securities. Rates at failed auctions are set at a level spelled out in official statements issued at the initial bond sale.
Investors have little opportunity to judge the risk that auctions will fail because of little public disclosure about interest rates set at the periodic bidding or other details such as how many bids were submitted or how many bonds were offered for sale.
Reporting System Changes
The Municipal Securities Rulemaking board is working on changes to its trade reporting system that would reveal at least the interest rate on auction bonds when they are traded. Currently, only the price is disclosed.
``I think you need to have more transparency in terms of the market so that investors can judge liquidity risks and so that people, both retail investors and corporate investors, can decide where they want to put their money,'' Joseph Fichera, chief executive officer of Saber Partners, a New York based financial adviser to local governments, said in an interview on Bloomberg Television.
Until recently, UBS and other banks that collect fees for running auctions have stepped in with their capital to prevent failures when bidding faltered. These firms have grown unwilling to commit their money to auction-rate securities after suffering at least $133 billion in credit losses and mortgage writedowns stemming from the subprime mortgage collapse.
Wednesday, February 13, 2008
Coca-Cola profit rises sharply
(Reuters) - Coca-Cola Co (KO.N: Quote, Profile, Research), the world's largest maker of soft drinks, reported higher-than-expected quarterly profit on Wednesday, helped by higher sales, acquisitions and foreign exchange rates.
Coca-Cola said fourth-quarter net income was $1.21 billion, or 52 cents per share, compared with $678 million, or 29 cents per share, a year ago.
Excluding charges, Coke earned 58 cents per share, topping analysts' average estimate of 55 cents, according to Reuters Estimates.
Net operating revenue rose to $7.33 billion from $5.93 billion a year ago, helped by a 6 percent increase in sales of drink concentrate, the company's main business.
Currency exchange rates boosted revenue 8 percentage points, since the weak dollar versus foreign currencies increases the value of international sales when they are converted to U.S. dollars for inclusion on the company's income statement.
Unit case volume rose 5 percent in the quarter, supported by acquisitions.
Coke, which owns about 35 percent of its bottler Coca-Cola Enterprises Inc (CCE.N: Quote, Profile, Research), saw its year-ago profit impacted by an asset write-down the bottler took related to its North American franchise license.
U.S. Stocks Advance for Third Day, Led by Tech, Energy Shares
(Bloomberg) -- U.S. stocks rose for a third day, the longest stretch of gains in 2008, after increased demand at Applied Materials Inc. spurred a technology rally and energy shares climbed on higher gas-station sales.
Applied Materials, the largest maker of semiconductor- production equipment, advanced the most in four years on a surge in orders for machines that make flat screens. Exxon Mobil Corp. and ConocoPhillips led oil companies higher after the Commerce Department said rising prices at filling stations helped boost retail sales last month. Genentech Inc., the biggest U.S. maker of anti-cancer drugs, rallied the most in a month after its Avastin treatment helped slow the spread of breast tumors.
``The rally could last,'' said Eric Green, who helps manage $5 billion as senior managing partner at Penn Capital Management in Cherry Hill, New Jersey. ``We see the market heading higher.''
The Standard & Poor's 500 Index added 8.71 points, or 0.7 percent, to 1,357.57 at 11:31 a.m. in New York. The Dow Jones Industrial Average gained 89.98, or 0.7 percent, to 12,463.39. The Nasdaq Composite Index increased 31.57, or 1.4 percent, to 2,351.51. About five stocks rose for every two that fell on the New York Stock Exchange. European and Asian benchmarks dropped.
Applied Materials' report of increasing demand spurred speculation that technology companies' earnings will withstand an economic slowdown sparked by the collapse of the subprime mortgage market. The S&P 500 Information Technology Index has lost 14 percent this year, the worst performance among 10 industries.
Applied Materials
Applied Materials rose $1.26, or 7 percent, to $19.33. The company said orders for machines that make flat screens will rise as much as 5 percent this quarter, exceeding some analysts' estimates.
A gauge of computer-chip makers gained 1.8 percent, the second most among 24 industries in the S&P 500, led by Applied Materials, its third-biggest member.
Exxon, the largest U.S. crude producer, climbed $1.16 to $85.54. ConocoPhillips, the third-biggest, rallied 98 cents to $77.38. Energy companies in the S&P 500 climbed 1.4 percent even as oil for March delivery fell 44 cents to $92.34 a barrel in New York.
Filling station sales rose 2 percent in January after remaining unchanged the prior month, the Commerce Department said, as regular gasoline rose as high as $3.11 a gallon in early January. Total retail sales climbed 0.3 percent, compared with economists' forecast for a drop of 0.3 percent. Excluding gas, purchases rose 0.1 percent last month, the Commerce Department said.
Retailers in the S&P 500 fell 0.2 percent as a group after the report.
Genentech Rallies
Genentech added $1.46 to $71.38. The results were from a trial called Avado, which included patients who took Avastin with docetaxel chemotherapy.
Industrial companies also rose, led by Rockwell Automation Inc., the world's largest maker of factory controls, after the report on purchases by consumers bolstered confidence in the sagging economy. Rockwell increased $2.02, or 3.6 percent, to $57.60.
Deere & Co., the world's largest maker of farm tractors and combines, fell 97 cents, or 1.1 percent, to $85.51. Deere's comments that the U.S. housing slump will maintain ``continued pressure'' on sales of construction and forestry equipment overshadowed its increased annual forecast and first-quarter earnings surge.
A survey of Bloomberg users showed benchmarks for the world's biggest stock markets probably will fall for the next six months as economic growth slows, and investors are the most pessimistic in the U.S. and the U.K.
Tuesday, February 12, 2008
Adcock boss suspended
(Fin24) - Consumer goods giant Tiger Brands says it will be extending its independent investigation into collusion allegations in its healthcaredivision into all its businesses.
Van Vught said the company was "devastated" at the allegations.
"We will extend this investigation into every single business that we areinvolved in," Tiger Brands' non-executivechairperson Lex van Vught said ina statement.
"We are determined to find and root out any anti-competitive
or collusive practices," he said.
Also, the managing executive of Adcock Ingram Critical Care, Arthur Barnett,has been suspended by the board pending the conclusion of the independentinvestigation.
Van Vught said the company was "devastated" at the allegations.
Rand regroups, gains nearly 1%
(Fin24) - The rand currency strengthened nearly one percent against the dollar and bonds also firmed, regrouping after a sharp fall over the past two weeks, as emerging market sentiment improved and stocks recovered further.
"The slight correction today is on the back of the euro, the
JSE."
The local currency was trading at R7.71 to the dollar at 17:44 GMT, 0.9% stronger than its previous close in New York, after see-sawing between R7.6775 and R7.82 during the session.
Government bonds tracked the rand's move in relatively light trade, pulling back some of their sizable losses sparked by investor concern over an expected easing in economic growth.
Dealers said trade was largely flow-driven with dollar buying out of London early in the day paring gains before it drifted back on higher stocks and broader emerging market gains as those flows waned.
"Emerging markets are stronger, the dollar is weaker against the euro and local stocks are up on the Dow (Jones index) and we are just picking up that on the currency," ABN AMRO trader Paul Peter said.
"The slight correction today is on the back of the euro, the
JSE."
Conservationists battle coal firm
(Fin24) - A legal battle is brewing between conservationists and coal exploration company DMC Coal Mining over its plans to prospect for anthracite and torbanite in one of South Africa's most important regions for rare and endangered birds.
Reason is the region's importance as grassland and wetland habitat hosting a number of rare and endangered birds including Wattled Crane, Rudd's Lark, Botha's Lark and Blue Crane.
DMC Coal Mining has obtained prospecting rights to two properties in the Wakkerstroom region in south-eastern Mpumalanga and is also attempting to get prospecting rights over a further two properties.
This region had been previously examined by another coal exploration group - Keaton Energy - which decided not to apply for prospecting rights because of the sensitivity of the area.
DMC Coal Mining's plans are now being opposed by a number of environmental organisations including Birdlife South Africa, the Wildlife and Environment Society of South Africa, WWF-SA, the Endangered Wildlife Trust and the Ekangala Grassland Trust.
Reason is the region's importance as grassland and wetland habitat hosting a number of rare and endangered birds including Wattled Crane, Rudd's Lark, Botha's Lark and Blue Crane.
AIG Credit-Default Swap Losses Won't Be `Material'
(Bloomberg) -- American International Group Inc., the world's largest insurer by assets, said ``over time'' it may recoup losses in assets that declined by $4.88 billion in value in October and November.
Any losses by the unit that issues so-called credit-default swaps won't be material to AIG, the firm said today in a statement. AIG rebounded in New York trading after falling the most in two decades yesterday on disclosure that writedowns from the contracts, sold to protect fixed-income investors, were four times bigger than a previous estimate.
Chief Executive Officer Martin Sullivan, who manages units that originate, insure and invest in subprime mortgages or securities, assured investors in December that writedowns tied to the U.S. housing market were ``manageable.'' The company, based in New York, has said it doesn't expect to sell mortgage- related investments at a loss when markets are weak.
While AIG ``may have illustrated questionable judgment'' in its accounting lapse, it ``does not necessarily increase the probability of real economic impairment'' on assets held to maturity, said Mark Lane, analyst at William Blair & Co. in Chicago, today in a research note. He rates the company ``outperform.''
AIG advanced $1.45, or 3.2 percent, to $46.19 at 12:48 p.m. in New York Stock Exchange composite trading. The company has lost about 33 percent in the past 12 months, trailing the 5.7 percent decline of the Standard & Poor's 500 Index.
`Solid Upside'
``For patient investors willing to ride out near-term volatility, we see solid upside in the stock,'' said Morgan Stanley analyst Nigel Dally in a note to investors today. He rates the company ``overweight.''
The insurer's financial products unit issues contracts that promise to reimburse investors for losses tied to $505.5 billion of securities as of Nov. 25, including corporate debt, European mortgages and collateralized debt obligations, which bundle together loans.
AIG's independent auditor PricewaterhouseCoopers LLP found a ``material weakness'' in the company's accounting for the contracts, AIG said yesterday, and the insurer didn't know what they were worth at the end of 2007.
U.S. Stocks Rise After Buffett Offers to Help Bond Insurers
(Bloomberg) -- U.S. stocks rose for a second day, led by financial shares, on expectations Warren Buffett, the world's No. 1 investor, will help calm credit markets by offering to shore up bond insurers' finances.
Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., the three largest U.S. banks, climbed after Buffett said he's willing to take on $800 billion in municipal bond obligations in an interview with CNBC. Monsanto Co., the world's biggest seed producer, advanced for a third day on an increased profit forecast.
The Standard & Poor's 500 Index added 13.99 points, or 1 percent, to 1,353.12 at 12:29 p.m. in New York. The Dow Jones Industrial Average advanced 162.99, or 1.3 percent, to 12,403. The Nasdaq Composite Index climbed 15.24, or 0.7 percent, to 2,335.3. More than three stocks rose for every one that fell on the New York Stock Exchange. Shares in Europe and Asia also gained.
``It's another potential solution to some of the credit problems,'' Mark Bronzo, who helps manage $11 billion at Security Global Investors in Irvington, New York, said of Buffett's offer. ``That's why the markets are responding well.''
Concern that bond insurers don't have enough money to pay claims on the $2.4 trillion in assets they guarantee has contributed to a 7.4 percent drop in S&P 500 financial shares in 2008. MBIA Inc., the largest bond insurer, lost 80 percent of its value in the last year before today, and smaller rival Ambac Financial Group Inc. slumped 88 percent, on concern that the companies will lose their AAA credit ratings.
Buffett's Offer
Citigroup added 73 cents to $26.54. Bank of America rallied 66 cents to $42.80. JPMorgan climbed 46 cents to $43.81. Bear Stearns Cos., the fifth-biggest U.S. securities firm, increased 49 cents to $80.25.
Buffett said he offered to take on the municipal-bond liabilities of MBIA, Ambac Financial and FGIC Corp. Buffett's Berkshire Hathaway Inc. would provide so-called reinsurance for the debt, he said in an interview with CNBC television.
One company turned down the offer and the two others haven't responded, Buffett, chairman of Berkshire Hathaway Inc., told CNBC.
MBIA slipped 79 cents to $12.79. Ambac lost 29 cents to $10.19. Buffett's offer doesn't include the insurers' subprime- related obligations.
'Project Lifeline'
Financial shares also climbed on plans to help delinquent homeowners avoid foreclosure. Bank of America, Citigroup and four other U.S. lenders announced a plan to offer a 30-day freeze on home foreclosures while loan modifications are considered. Treasury Secretary Henry Paulson and U.S. Housing and Urban Development Secretary Alphonso Jackson said today at a news conference in Washington that ``Project Lifeline'' would help stabilize communities disrupted by mortgage defaults.
Monsanto rallied $3.27, or 2.9 percent, to $117.30 after raising its 2008 profit forecast on higher demand for weed killer and genetically modified corn and soybeans. Profit in the year ending Aug. 31 will increase to $2.70 to $2.80 a share, 20 cents above the range of a Jan. 3 forecast.
Schlumberger Ltd. advanced $2.57 to $83.06 after Bear Stearns raised its recommendation on the world's largest oilfield-services provider to ``outperform'' from ``peer perform,'' saying the company's offshore drilling and exploration make it ``well positioned for the next phase of the oilfield service business cycle.''
Schering-Plough
Schering-Plough Corp. gained $1.16 to $21.78. The maker of Vytorin and Zetia cholesterol pills reported fourth-quarter profit, excluding some items, of 52 cents a share, beating the 27-cent average estimate of 17 analysts surveyed by Bloomberg.
General Motors Corp., the world's largest automaker, gained after reporting an adjusted fourth-quarter profit, not counting costs and gains the company considers one-time items, of 8 cents a share. On that basis, analysts estimated a loss of 64 cents. GM's net loss in the quarter was $722 million.
The Russell 2000 Index, a benchmark for companies with a median market value of $589 million, gained 9.80, or 1.4 percent, to 709.55, led by GMH Communities Trust. The provider of housing to students and the military surged the most since its initial public offering in 2004 after agreeing to be bought in two transactions for a total of $787 million. GMH added $3.13, or 56 percent, to $8.72.
NxStage Medical Inc. fell the most since its 2005 initial public offering, dropping $3.30, or 26 percent, to $9.45. The maker of portable dialysis systems said it expects a loss of as much as $1.52 a share in 2008, wider than the $1.06 loss estimated by analysts in a Bloomberg survey.
World Wrestling Entertainment
World Wrestling Entertainment Inc. climbed $1.16, or 7.6 percent, to $16.47. The producer of television's ``WWE Friday Night SmackDown'' reported fourth-quarter revenue and profit that was higher than the average analyst estimate as video sales and ticket prices increased.
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