... TOKYO (Reuters) - The dollar edged up against ... risky carry trades, in which the low-yielding Japanese currency was used to finance the purchase ... said Mitsuru Sahara, senior vice president of forex at Bank of Tokyo-Mitsubishi UFJ. "Given its ...
Thursday, March 27, 2008
Dollar edges up after falling on recession fears
Taipei exchange reaches out to SET-listed firms
... reaches out to SET-listed firms The Taiwan Stock Exchange hopes to attract 10 Taiwanese firms operating ... New York, London, Dubai, Singapore, Hong Kong, Egypt and Vietnam. He estimated there were around ...
Wednesday, March 26, 2008
UPDATE 1-Toronto stocks little changed as BCE drags
... TORONTO, March 26 (Reuters) - The Toronto Stock Exchanges main index was little changed on Wednesday ... was also intensified as a takeover of Anglo-Swiss miner Xstrata (XTA.L: "I think its continuing ...
Nissan shares rise after Ghosn forecasts higher sales
... in about two weeks on the Tokyo Stock Exchange after its chief executive said the automakers ... SA, forecasts that higher sales in Russia, China and the Middle East will counter slowing ...
PRESS DIGEST - Financial Times - March 26
... cash, stoking fears the recent easing in equity markets may not signal the end of the ... 100 rising 3.5 percent on Tuesday and Japans Nikkei rising 2.1 percent. CITYS FRAUD SQUAD ...
Sensex climbs 6.1% as financials rally
... jumped 9.6 per cent to Rs1,492.55, and Wipro rallied nine per cent to Rs434.70. Pakistans benchmark Karachi Stock Exchange 100 Index retreats from a record, falling 59.48 points, or 0.4 per cent, to ...
Tuesday, March 25, 2008
E. African markets get support
... the capital market in East African region. Stock markets are seen as enhancing the operations of ... some where else where there are instruments. Equity market is more developed than the debt market ... 120 million people after South Africa and Nigeria. To succeed, regional approaches require harmonized trading ...
4. What Created This Monster?
... other banks and brokerage firms, the 1987 stock market crash, and the near meltdown of the ... now the vice chairman of UBS, the Swiss investment banking giant, was unavailable for comment. ...
The "Isms" That Bedevil Bush
... is to remain always a child." With Iraq entering its sixth year, the dollar sinking ... a Nobel Prize for proving, when the stock market bubble, caused by the Feds easy money ...
Inchcape - Acquisition
... ST PETERSBURG BUSINESS IN CONTINUED EXPANSION INTO RUSSIA Inchcape plc (Inchcape or the Group), the ... The company news service from the London Stock Exchange END ACQSEWFWSSASEED ...
Comstar Broadband Subscriber Base in Russian Regions Reaches 50,000
... Comstar Broadband Subscriber Base in Russian Regions Reaches 50,000 MOSCOW, BUSINESS WIRE -- ... last mile );" class=hotlink2>access to 98% of Moscow households. The Company also offers communications services ... under the symbol "CMST" on the London Stock Exchange. Some of the information in this press ...
Orascom Hotels and Development to list on SWX
... to list its shares on the Swiss stock exchange SWX in a bid to speed up ... internationalisation and growth of the group. The Egyptian magnate Samih Sawiris group will form a ...
Laramide Announces Closing of Treasury Metals Financing
... and posted for trading on the Toronto Stock Exchange or the TSX Venture Exchange; and (ii) ... Its wholly owned uranium assets are in Australia and the United States. Laramides portfolio of ...
Monday, March 24, 2008
AECI mulls split of property unit from core business
... JSE-listed explosives and chemicals company AECI would consider ... to buy such prime property in both Johannesburg and Cape Town. The property portfolio itself ...
Gold down by Rs 200 in India
Commodity Online MUMBAI: Persistent offerings from stockists and some investors shifting their funds towards rising stock market, hit gold prices at the bullion market here on Monday.
Stocks End Volatile Week With Big Rally
Wall Street capped a week of remarkable volatility with a big advance Thursday that left stocks higher for the week but didnt silence all of investors concerns about the economy and the financial system.
Saturday, March 22, 2008
Dow up 420 as Fed cuts key rate to 2.25%
Stocks enjoy their best day of 2008 after the central bank makes another move to stabilize the economy. Visa raises a record $17.9 billion in its initial public offering and could push the market higher. Lehman Bros. and Goldman Sachs report better-than-expected earnings.
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.
Humana, Following WellPoint, Cuts Earnings Forecast
(Bloomberg) -- Humana Inc., the second-largest seller of Medicare drug plans, followed rival WellPoint Inc. in cutting its 2008 earnings forecast as prescription costs jumped. The insurer fell the most ever in New York trading.
Humana's revised forecast stems from ``updated projections'' for the company's Medicare prescription drug plans, a stand-alone drug benefit sold to Americans age 65 and older. Humana has been racing UnitedHealth Group Inc., the largest seller of Medicare drug plans, to gain more members and has lowered some prices as a result, analysts said.
Humana, of Louisville, Kentucky, fell 26 percent, or $12.14, to $35.24 at 9:37 a.m. in New York Stock Exchange composite trading. It dropped 24 percent yesterday. The industry selloff that began two days ago continued as WellPoint, UnitedHealth and Aetna Inc. also declined. Investors yesterday cut $24 billion in value from the four biggest U.S. insurers.
``Humana priced their drug plan too low in order to gain market share, and we're seeing the result of that today,'' said Sheryl Skolnick, a CRT Capital Group analyst in Stamford, Connecticut, in a telephone interview. ``They are offering a plan with zero co-pays for a 90-day supply of generics through RightSource, their mail-order. And when you tell seniors something is free, they keep coming back again and again.''
Earnings will range from $4 to $4.25 a share, rather than the $5.35 to $5.55 given on Feb. 4, Humana said in a statement. First-quarter earnings will be 44 cents to 46 cents a share, down from a forecast of 80 cents to 85 cents, the insurer said.
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
Market slips on economic fears, McDonald's gains
(Reuters) - U.S. stocks slipped on Monday as mounting concerns about the economy overshadowed stronger-than-expected same-store sales from McDonald's Corp
Oil Rises to Record $107 as Returns Outpace Financial Markets
(Bloomberg) -- Crude oil rose to a record $107 a barrel in New York as investors purchased futures because the returns have outpaced those of financial markets.
Oil in New York has surged 77 percent over the past year as the S&P 500 and Dow averages dropped. Hedge-fund managers and other large speculators increased net-long positions, or bets on higher oil prices, in the week ended March 4, a Commodity Futures Trading Commission report showed.
``We're witnessing an ongoing flow of fund buying, which isn't particularly motivated by the particulars of the petroleum market,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``Prices have rallied to such an extent where sellers have backed off. Any time prices go lower the buyers come right back into the market.''
Crude oil for April delivery rose $1.36, or 1.3 percent, to $106.51 a barrel at 10:55 a.m. on the New York Mercantile Exchange. Futures surged to $107 a barrel today, the highest since trading began in 1983.
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
Lego wants to build business with girls
(Reuters) - Nine-year-old Ida Fraende, who likes to play with Lego bricks, is not so unusual in Scandinavia but globally speaking she is not typical: Jorgen V. Knudstorp hopes to change that.
The Chief Executive of Europe's largest toymaker, who has brought the once-troubled group back to profit and renewed its growth ambitions, has a keen eye on the market where Mattel and Hasbro of the United States are the mom and pop.
Girls are an area where "we'll never stop trying," Knudstorp, who joined the family-owned firm in 2001 from consultancy McKinsey & Company, told Reuters.
"I think there is something that genetically skews us towards boys, but we can do better."
To win girls over Lego -- whose iconic plastic bricks have entertained children and wounded unwary barefoot parents since the late 1940s -- is working to change its mindset, and taking its bid for their custom online.
The firm founded in 1932 by carpenter Ole Kirk Christiansen intends next year to launch an online Lego Universe, to tap into a booming market that has created successes such as Second Life and World of Warcraft.
The group which started out with wooden toys like ducks and trucks has recovered from a massive 1.9 billion Danish crowns ($388 million) loss in 2004 and managed to build market share in a stagnant global market.
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.
Oil Advances to Record $105.97 as Dollar Drops to All-Time Low
(Bloomberg) -- Crude oil rose to a record $105.96 a barrel in New York as the U.S. dollar fell to its lowest ever against the euro.
Gold and copper also advanced to all-time highs as the sinking dollar made commodities priced in the U.S. currency cheaper. Oil closed at a record yesterday after U.S. crude inventories fell for the first time in eight weeks and OPEC refrained from raising production.
``The reason we've gone above $105 is that the market is still focused on the weakness of the dollar,'' Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland, said. ``It's going to take more signs of demand destruction around the world before oil stops gaining on the dollar.''
Crude oil for April delivery rose as much as $1.45, or 1.4 percent, to a $105.97 a barrel on the New York Mercantile Exchange, the highest since futures began trading in 1983. The contract traded for $105.15 at 1:11 p.m. in London.
Brent crude for April settlement rose as much as $1.31, or 1.3 percent, to match the $102.95 a barrel record previously set on March 3. The contract was at $102 on London's ICE Futures Europe exchange at 1:14 p.m. local time.
The euro climbed to $1.5347, the highest level since the single currency's debut in 1999, on speculation the European Central Bank will hold its key interest rate at a more than six- year high as the Federal Reserve keeps cutting its benchmark rate.
``If you think the dollar will weaken then you may choose to sell the dollar and go long commodities,'' said Harry Tchilinguirian, senior analyst at BNP Paribas SA in London. ``Robust fundamental outlooks, as in the case for oil, present potential to strongly offset the decline in the nominal value of the dollar.''
European Stocks, U.S. Index Futures Decline; Asian Shares Rise
(Bloomberg) -- European stocks fell for the third day this week and U.S. index futures declined on concern credit- market losses will widen at financial companies and record oil prices will curb airline earnings.
UBS AG sank to the lowest since 2003 after JPMorgan Chase & Co. said Europe's biggest bank probably sold $24 billion in holdings of mortgage-backed securities in a ``fire sale.'' Aegon NV, the second-largest Dutch insurer, lost the most in three weeks on a 26 percent drop in earnings. British Airways Plc had its steepest decline in a week, saying its profit margin will drop.
A rally in mining companies helped Asian stocks rise for the first time in six days, while U.S. index futures fell before a report that will probably show contracts to buy previously owned homes slipped in January for a third month.
``News from the financial industry brings a negative wind,'' said Laurent Vallee, who helps oversee $6.1 billion at Richelieu Finance in Paris. ``We remain cautious on financial stocks.''
Europe's Dow Jones Stoxx 600 Index lost 0.3 percent to 314.62 as of 12:45 p.m. in London. Futures on the Standard & Poor's 500 Index slipped 0.5 percent, while the MSCI Asia Pacific Index added 1.8 percent.
Stocks maintained their losses after the European Central Bank left its key interest rate unchanged. ECB President Jean- Claude Trichet is scheduled to brief reporters at 2:30 p.m. Frankfurt time. The Bank of England earlier kept its benchmark rate on hold.
The Stoxx 600 has lost 14 percent this year on concern the collapse of subprime mortgages and a slowdown in the U.S. economy will curb profit growth in Europe. UBS may have writedowns of about $18 billion after unloading 25 billion Swiss francs of mortgage-backed securities, according to JPMorgan.
Money Markets
Carlyle Capital Corp., which invests in AAA rated mortgage securities, failed to meet margin calls and said today it received a notice of default, while Thornburg Mortgage Inc., a U.S. specialist in adjustable-rate loans too big to be sold to Fannie Mae and Freddie Mac, also received a default notice on a $320 million loan.
The cost of borrowing euros for three months rose to the highest level in seven weeks, fueling concern a coordinated effort by central banks to limit the fallout from the U.S. housing slump and revive lending is faltering.
UBS dropped 2 percent to 31.6 francs. Europe's biggest bank by assets ``likely'' sold its 25 billion francs ($24 billion) prime Alt-A portfolio in a ``fire sale,'' JPMorgan said as it lifted its ``credit-crisis'' writedown estimate for the bank to 18.5 billion francs.
Tuesday, March 4, 2008
Bernanke Urges Banks to Forgive Portion of Mortgages
(Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages for more borrowers whose home values have declined.
``Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,'' Bernanke said in a speech in Orlando, Florida today. ``Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.''
Bernanke's call goes beyond the stance of the Bush administration and previous Fed comments. By comparison, the central bank's Feb. 27 report to Congress called for lenders to ``pursue prudent loan workouts'' through means such as modifying mortgage terms and deferring payments.
``Delinquencies and foreclosures likely will continue to rise for a while longer,'' Bernanke said in the comments to the Independent Community Bankers of America. ``Supply-demand imbalances in many housing markets suggest that some further declines in house prices are likely.''
Subprime borrowers are about to see their mortgage rates increase more than 1 percentage point, he said. ``Declines in short-term interest rates and initiatives involving rate freezes will reduce the impact somewhat, but interest-rate resets will nevertheless impose stress on many households.''
`Vigorous Response'
In the past, homeowners could refinance, though that option is now ``largely'' gone because sales of bonds backed by subprime mortgages ``have virtually halted,'' Bernanke said. ``This situation calls for a vigorous response.''
Bernanke didn't comment in his speech text on the outlook for the economy or interest rates. Traders expect the Federal Open Market Committee to lower the benchmark rate by 0.75 percentage point by or at the panel's next meeting on March 18, based on futures prices.
Bernanke signaled in congressional testimony last week that the Fed is prepared to lower rates again even amid signs of accelerating inflation.
Yesterday, the Fed and other regulators sent letters to institutions they supervise, encouraging the banks to report on their efforts to modify mortgages at risk of default.
``This will make it easier for regulators, the mortgage industry, lawmakers and homeowners to assess the effectiveness of these efforts,'' Fed Governor Randall Kroszner said in a statement yesterday.
Foreclosures Climb
The number of U.S. homeowners entering foreclosure rose 75 percent in 2007, with more than 1 percent in some stage of foreclosure during the year, according to RealtyTrac Inc. of Irvine, California. For the year, more than 2.2 million default notices, auction notices and bank repossessions were reported on about 1.3 million properties.
``Lenders tell us that they are reluctant to write down principal,'' Bernanke said. ``They say that if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again.''
The Fed chairman countered that by reducing the amount of the loan, this ``may increase the expected payoff by reducing the risk of default and foreclosure.''
Bernanke spoke in a state that's among the worst affected by the housing collapse. Miami home prices have dropped 17.5 percent in the past year, the most of 20 large U.S. cities, according to the S&P/Case-Shiller index. Foreclosures in Florida jumped at more than double the nationwide pace, rising 158 percent in the past year, according to RealtyTrac.
Porsche Profit Rises on Cayenne SUV, Volkswagen Stake
(Bloomberg) -- Porsche SE, maker of the 911 sports car, said first-half profit jumped 44 percent as a revamped Cayenne sport-utility vehicle won buyers and the company added to its stake in Volkswagen AG.
Net income in the six months ended Jan. 31 rose to 1.3 billion euros ($1.97 billion) from 897 million euros a year earlier, the Stuttgart, Germany-based company said in a statement today. Pretax profit increased 24 percent to 1.66 billion euros.
Porsche doubled first-half sales of the Cayenne to 20,340 SUVs, boosting overall deliveries 19 percent, even as demand for the 911 and the Boxster roadster waned. The company has been raising its stake in Volkswagen, Europe's biggest carmaker, since buying a holding in September 2005. Porsche said yesterday that it plans to own a stake exceeding 50 percent.
First-half revenue increased 14 percent to 3.49 billion euros, Porsche said today, reiterating figures announced in January. Earnings figures were adjusted to take account of the effects of the expanding stake in Volkswagen as well as by hedging transactions related to the stock purchases, it said.
While Porsche has cut U.S. inventories to prepare for a possible economic slowdown, three new models and demand from emerging markets should spur sales in the financial year ending July 31 and produce a result prompting ``tears of joy,'' Wiedeking told investors Jan. 25.
Monday, February 25, 2008
Electronic Arts bids for Take-Two
(Reuters) - Video game giant Electronic Arts on Sunday said it had made an unsolicited $1.9 billion offer for "Grand Theft Auto" publisher Take-Two Interactive Software, escalating its battle with Activision for the title of biggest video game maker.
Electronic Arts said it had pursued the deal privately since December, and Take-Two on Sunday immediately rejected the offer, a 50 percent premium to its Friday close, and accused EA of trying to scoop up a company in turnaround with an "inadequate" bid just before the publication of its next hit.
The $26-per-share all-cash bid is Electronic Arts' answer to Activision Inc's $18 billion acquisition of the gaming unit of French media and telecoms giant Vivendi. That combination, announced last November, is set to challenge EA's long-standing industry dominance.
Electronic Arts, publisher of blockbuster games like "Madden" and "Need for Speed," would become the largest sports game maker by far if it buys Take Two.
The offer follows months of speculation that Take-Two would be acquired by a major games publisher or media firm, with News Corp and Viacom often mentioned as possible suitors as they eye the fast-growing video game industry.
Take-Two said the offer valued it at a "significant discount" to peers. EA's offer would be about 18 times its expected fiscal 2008 earnings, while France's Ubisoft trades at 34 times expected earnings in the year ending March 2009 and Activision, with a similar year, trades at 24 times.
Take-Two Chairman Strauss Zelnick, who helped oust former management last March after it was laid low by accounting scandals and controversy over its games, said he hadn't ruled out a potential deal.
Auction-Rate Bonds Force `Predatory' Yields on Cities
(Bloomberg) -- U.S. municipal borrowers from Camden, New Jersey, to Sacramento, California, may face a third week of higher interest costs as failures in the auction-rate bond market persist.
Auctions run by banks to determine the rate on more than $45 billion of bonds didn't attract enough buyers last week, according to JPMorgan Chase & Co. research. Even some successful auctions resulted in rates that were twice what borrowers paid in January, as investors who submitted bids demanded higher yields.
``The market right now is very predatory,'' said Marcia Maurer, chief financial officer of the Sacramento Regional County Sanitation District. The agency's weekly expense on $250 million of debt more than doubled to $343,000 from last month.
Investors enticed by rates that jumped as high as 20 percent are seeking opportunities in the $330 billion market no longer supported by dealers from Goldman Sachs Group Inc. to Citigroup Inc. and UBS AG that for years committed their capital to prevent failures. Thousands of unsuccessful auctions have driven up taxpayers' borrowing costs and left investors in the securities unable to get their money.
``Aggressive institutional investors have moved in to pick up auction-rate issues at short-term rates ranging from 5 percent to as much as 15 percent or more,'' George Friedlander, a municipal strategist at Citigroup in New York, said in a report at the end of last week.
Failure Rate
Four of the biggest agents that collect orders from bond dealers and determine winning rates reported failures on 258, or 67 percent, of 386 auctions Feb 22. That's in line with the average since Feb. 15, according to data compiled by Bank of America Corp. and Bloomberg.
Auction bonds, created in 1984, had until recent months allowed municipalities, hospitals, student lenders and funds to borrow long-term at money-market costs by adjusting interest rates through bidding every seven, 28 or 35 days.
When an auction fails, the rate reverts to a ``maximum'' specified in bond documents, or one pegged to money-market benchmarks. Holders of the bonds are stuck with the securities until a later auction attracts enough demand.
Hedge funds and other non-traditional investors showed ``strong interest'' last week in tax-exempt deals with high rates, Alex Roever, a JPMorgan fixed-income analyst, said in an e-mail. The average rate for seven-day municipal auction bonds rose to a record 6.59 percent on Feb. 13 from 4.03 percent the previous week, according to a Securities Industry and Financial Markets Association index.
Closed-End Funds
Many of last week's failures occurred at auctions of debt issued by closed-end funds with penalty rates ranging from 3 percent to 6 percent, data compiled by Deutsche Bank AG, Bank of New York Mellon Corp., Wells Fargo & Co. and Wilmington Trust Corp. show. Closed-end funds have about $60 billion in auction securities outstanding. Municipalities have $166 billion.
The auction-rate market began unraveling late last year as investor confidence in the health of bond insurers backing many of the securities waned. A bank bailout of New York-based Ambac Financial Group Inc. might come as soon as this week, according to a person familiar with rescue talks.
The collapse accelerated as banks including Citigroup and UBS, which have taken losses of about $162 billion from securities related to the collapse of subprime mortgages, grew unwilling to commit capital to support the auctions.
Home Resales in U.S. Probably Dropped, Further Eroding Growth
(Bloomberg) -- Sales of existing homes in the U.S. probably dropped in January to the lowest level in at least nine years, according to a survey of economists, signaling the housing slump is deepening and will weigh on growth in 2008.
The National Association of Realtors will report that purchases fell 1.8 percent to an annual rate of 4.8 million, the fewest since record-keeping began in 1999, according to the median forecast in a Bloomberg News survey of 63 economists.
Mounting foreclosures are adding to a glut of unsold homes that is driving down property values. Would-be homebuyers may be waiting for even lower prices, keeping the housing market depressed for a third year and dragging the economy close to a recession.
``With the backdrop of elevated inventories of unsold homes and continued falling home prices, prospects for the housing market in general seem quite grim,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York.
The Realtors group is scheduled to release the report at 10 a.m. in Washington. Estimates in the Bloomberg News survey ranged from 4.65 million to 5 million.
For all of last year, sales of single-family homes declined 13 percent, the most since 1982, the group said Jan. 24. Earlier this month, it forecast sales this year would slip to 5.38 million, from 5.65 million for all of 2007.
The effects of the worst housing recession in 25 years have spread into other areas of the economy. The Federal Reserve Bank of Philadelphia's general economic index fell this month to minus 24, the weakest reading in seven years.
Stocks Advance in Europe, Asia, Led by UBS; U.S. Futures Fall
(Bloomberg) -- Stocks gained in Europe and Asia, led by financial companies, on speculation bond insurers will avoid a cut in their credit ratings and limit further losses related to subprime mortgages. U.S. index futures declined.
UBS AG and BNP Paribas SA led banks higher in Europe, while Millea Holdings Inc., Japan's biggest insurer, and Commonwealth Bank of Australia climbed in Asia. Royal Bank of Scotland Group Plc gained on expectations Qatar Investment Authority may buy a stake, while Alliance & Leicester Plc jumped on speculation it may get a bid from Lloyds TSB Group Plc.
The MSCI World Index gained 0.7 percent to 1,458.88 as of 1:24 p.m. in London, while Standard & Poor's 500 Index futures slipped 0.1 percent. The MSCI World Financials Index jumped 1.3 percent, the most in almost two weeks, as investors speculated Ambac Financial Group Inc. may get new capital.
``We're making our way toward a rescue plan for Ambac,'' said Salah Seddik, who helps oversee $5.9 billion at Richelieu Finance in Paris. ``This is reassuring and good news for financial stocks. It means that in terms of writedowns, the worst is behind us.''
Speculation that companies in the bond-insurance industry may not be able to maintain the AAA credit ratings they rely on to insure about $2.4 trillion in securities has contributed to an 8.1 percent decline in the MSCI World this year.
Europe's Dow Jones Stoxx 600 Index advanced 1.3 percent, with all 18 national markets gaining. Germany's DAX added 1 percent, while France's CAC 40 rose 1.5 percent. The U.K.'s FTSE 100 jumped 1.4 percent.
Asian Indexes
The MSCI Asia Pacific Index climbed 1.4 percent. Japan's Nikkei 225 Stock Average increased 3.1 percent to 13,914.57, the highest close since Jan. 15.
UBS, Europe's largest bank by assets, rallied 2.5 percent to 36.58 Swiss francs. BNP Paribas, France's biggest bank, advanced 4.3 percent to 63.84 euros. Deutsche Bank AG, Germany's largest lender, gained 1.9 percent to 75.79 euros.
Millea jumped 8.9 percent to 4,030 yen, the most since Oct. 2. Commonwealth Bank, Australia's biggest mortgage lender, rose 4.9 percent to A$44.67.
Ambac may get $3 billion in new capital as part of a rescue agreement with banks, according to a person with knowledge of the discussions. Ambac spokeswoman Vandana Sharma declined to comment specifically on the discussions.
Bailout Plan
Stocks climbed in late trading in the U.S. on Feb. 22 after CNBC on-air editor Charles Gasparino said that a bailout may be announced this week, citing bankers working on the deal. Gasparino also said ``the entire deal could fall apart.''
``The efforts to prevent Ambac from collapsing will push the market up today, particularly financial stocks,'' said Erhan Aslan, a sales trader at Concord Investmentbank AG in Frankfurt.
Royal Bank of Scotland rallied 6.2 percent to 401.5 pence. The Qatari government is considering an investment in the U.K.'s second-largest bank, the Sunday Telegraph Business reported, citing unidentified people with knowledge of the matter.
Alliance & Leicester gained 7.4 percent to 547.5 pence, and Bradford & Bingley Plc jumped 7.2 percent to 202 pence.
Lloyds TSB, the biggest U.K. provider of personal loans, is in the ``early stages'' of assessing approaches to smaller rivals Alliance & Leicester and Bradford & Bingley, the Sunday Telegraph reported, citing unidentified people close to the bank.
Thursday, February 21, 2008
Oil seen heading higher after topping $100
(Reuters) - Rampant oil prices are likely to continue to rise for a while yet as supply worries and investor demand for commodities outweigh concerns of economic slowdown.
Crude hit a record high of $101.32 on Wednesday and was trading at $98.64 at 9:45 a.m. EST on Thursday.
The price has climbed from below $50 at the start of 2007 and below $20 in early 2002.
"From here, we think that the next stage may well be a period of consolidation in the high $90s, and that could include increasingly frequent moves above $100," said Paul Horsnell of Barclays Capital.
Prices have risen in part because of expectations that the Organization of the Petroleum Exporting Countries, rather than increase oil output, will maintain or even cut supply at a meeting on March 5.
OPEC argues that factors beyond its control, such as speculation, are boosting prices. One OPEC minister made clear on Thursday that oil's push into triple digits would not bounce the group into changing supplies.
"We will not just react to $100 oil," Qatar's oil minister, Abdullah al-Attiyah, told Reuters by telephone. "OPEC will move when it sees physical demand for its oil."
Morgan Stanley Hires Kenneth deRegt to New Role Overseeing Risk
(Bloomberg) -- Morgan Stanley, the second-biggest U.S. securities firm by market value, hired Kenneth deRegt to a new position in the office of the chairman, where he will oversee risk management and internal controls.
DeRegt, who worked at Morgan Stanley for 20 years before joining Aetos Capital in 2002, will start on Feb. 25 and join the firm's management committee, according to an internal memo today from John Mack, Morgan Stanley's chief executive officer. The contents of the memo were confirmed by Mark Lake, a spokesman in New York.
U.S. Stocks Fall, Erasing Early Gains; Exxon, GE Shares Retreat
(Bloomberg) -- U.S. stocks fell after manufacturing in the Philadelphia region unexpectedly contracted the most in seven years and a drop in oil prices dragged down energy shares.
Exxon Mobil Corp., Chevron Corp. and General Electric Co. declined, helping erase a 76-point gain in the Dow Jones Industrial Average. The market's losses were limited by gains in technology companies after Citigroup Inc. told clients to buy shares of Cisco Systems Inc., the largest maker of computer- networking equipment.
Wednesday, February 20, 2008
Sharper Image Files for Bankruptcy Following Losses
(Bloomberg) -- Sharper Image Corp., the seller of $300 electric shavers and $1,999 massage chairs, filed for bankruptcy protection after losing money in 11 of the last 13 quarters.
The 31-year-old retailer will shed 90 stores while it deals with a ``severe liquidity crisis,'' Chief Financial Officer Rebecca Roedell said in papers filed last night in U.S. Bankruptcy Court in Wilmington, Delaware. Sharper Image has lost more than $135 million since early 2005 on bad publicity stemming from lawsuits over its Ionic Breeze air purifiers and ``ever-tightening'' credit markets, the company said.
Former Chairman Richard Thalheimer founded Sharper Image in 1977 and built it into a company with 184 stores by selling gadgets such as the Ionic Breeze and $100 shaving mirrors. By January, sales had fallen every quarter for three years, and the San Francisco-based retailer brought in turnaround specialists to run the company last week.
The chain ousted Thalheimer, 59, in 2006 after losing more than three-quarters of its stock market value. Sharper Image, which peaked at $39.98 in February 2004, traded at 40 cents at 11:39 a.m. in Nasdaq Stock Market composite trading.
The company listed assets of $251.5 million and debt of $199 million and is in negotiations to sell its most unprofitable stores and inventory. It competes with Brookstone Inc. and New York-based Hammacher Schlemmer.
Another retailer, Virginia Beach, Virginia-based catalog company Lillian Vernon Corp., also filed for bankruptcy protection with a plan to sell its assets to help pay creditors.
U.S. Stocks Climb, Erasing Earlier Drop; Hewlett-Packard Gains
(Bloomberg) -- U.S. stocks rose, led by technology and bank shares, after Hewlett-Packard Co.'s profit topped estimates and investor William Ackman proposed a restructuring of bond insurers in an effort to minimize credit losses.
Hewlett-Packard, the biggest maker of personal computers, climbed the most in two years and helped the Dow Jones Industrial Average erase a 109-point drop. Wells Fargo & Co. and Citigroup Inc. led financial shares to their steepest gain in a week on Ackman's plan. TJX Cos., owner of the T.J. Maxx and Marshalls discount chains, led a rally in retailers after posting profit that topped analysts' estimates.
The Standard & Poor's 500 Index gained 2.41 points, or 0.2 percent, to 1,351.19 at 12:57 p.m. in New York. The Dow Jones Industrial Average rose 12.45, or 0.1 percent, to 12,349.67. The Nasdaq Composite Index increased 6.9, or 0.3 percent, to 2,313.1. About four stocks rose for every three that fell on the New York Stock Exchange.
Stocks dropped earlier in the day on concern competition will reduce profits among wireless networks and faster inflation will keep the Federal Reserve from cutting interest rates.
Hewlett-Packard rose $3.33 to $47.28 First-quarter net income increased 38 percent to $2.13 billion, or 80 cents a share, from $1.55 billion, or 55 cents, a year ago. Excluding expenses for acquisitions, profit was 86 cents a share, five cents more than the average analyst estimate in a Bloomberg survey. The company also raised its annual sales forecast on increasing demand overseas.
Tech Rally
Technology companies in the S&P 500 added 1.3 percent as a group, the steepest advance among 10 industries.
Wells Fargo, the biggest bank on the West coast, climbed 67 cents to $30.53. Citigroup added 39 cents to $25.71.
Ackman distributed a plan to restructure bond insurers that may prevent dividends from being paid to the parent companies and minimize losses for holders of asset-backed securities.
Tuesday, February 19, 2008
Wal-Mart Profit Climbs on Grocery, Electronics Sales
(Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, said fourth-quarter profit rose more than analysts estimated after it stepped up U.S. holiday discounts and boosted sales in Asia and Latin America.
Full-year earnings will be at most $3.43 a share, less than analysts' projections, the retailer said today. Wal-Mart gained 1 percent in New York trading.
International sales advanced 19 percent, led by China, Brazil and Argentina. In the U.S., Wal-Mart drew cash-strapped customers with an expanded consumer-electronics section and more discounts on groceries. Quarterly sales at stores open at least a year outpaced Target Corp. for the first time in 3 1/2 years.
``Nobody gets rich selling groceries, unfortunately, but I do think it's a great way to drive traffic,'' Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, said in a Bloomberg Television interview. ``In this economic environment, if the consumer's shifting down in terms of the way they're spending their dollars, that benefits Wal-Mart.''
Sorrentino helps oversee $12 billion in assets including Wal-Mart shares.
Net income climbed 4 percent to $4.1 billion, or $1.02 a share, from $3.94 billion, or 95 cents, a year earlier, the Bentonville, Arkansas-based company said today in a statement. Excluding one-time items, profit beat estimates by 2 cents.
Wal-Mart said it expects to earn between 70 cents and 74 cents a share in the current quarter and between $3.30 and $3.43 for the year that ends in early 2009. Analysts surveyed by Bloomberg projected profit of 74 cents for the quarter and $3.44 for the year.
Share Performance
Wal-Mart rose 51 cents to $49.95 at 9:34 a.m. in New York Stock Exchange composite trading. The shares increased 4 percent this year before today, compared with an 8.1 percent decrease in the Standard & Poor's 500 index.
Revenue for the three months that ended Jan. 31 climbed 8.4 percent to $107.4 billion, the first time it exceeded $100 billion, Wal-Mart said.
Excluding costs including a writedown at its Japan unit, Wal-Mart earned $1.04 a share. Nineteen analysts surveyed by Bloomberg projected average profit of $1.02.
``Clearly our underlying operational performance exceeded the expectations we had at the beginning of the quarter,'' Chief Executive Officer H. Lee Scott said on a recorded call. The performance of the U.S. economy ``will be a critical factor'' this year, he said.
Consumer Spending
Consumers have curtailed outlays on extras as they find themselves spending more for food, fuel and housing. Before the holiday season, Wal-Mart made price cuts earlier and on 20 percent more items. Last month, the retailer introduced its own ``economic stimulus'' package, marking down groceries, medicines, fitness equipment and electronics as much as 30 percent.
While Wal-Mart has suffered from a slowing U.S. economy because many of its customers live paycheck to paycheck, the retailer has also gained because of its appeal as a destination for cost-conscious shoppers, said David Abella, an analyst at Rochdale Investment Management in New York with $2.5 billion in assets including Wal-Mart shares.
``They are benefiting from it at the expense of competitors,'' said Abella. ``The low-price effort, which is working especially well because of the slowdown, probably helped get some market share back from Target.''
Foodmakers squeezed by costs, strapped consumers
(Reuters) - For more than a year, food makers and other consumer products companies have passed on much of the burden of rising commodity costs to consumers.
In fact, companies such as H.J. Heinz (HNZ.N: Quote, Profile, Research) and Hormel Foods Corp (HRL.N: Quote, Profile, Research) proved again with earnings forecasts and announcements on Friday that this was still the case early this year, fueling a rally in food stocks.
But that relief could prove short-lived, as 2008 could be the year consumers say "enough!" and start shunning branded products for less expensive private-label alternatives, industry experts warn.
"The next round of (increases) will actually start to impact consumer behavior in a profound way," Ken Harris, a principal at consulting firm Cannondale Associates, said.
That could hit profits at the companies that already have exhausted most measures to cut costs and become more efficient over the past several years in the wake of soaring prices for wheat, cocoa, milk and energy, just to name a few.
"When you say input costs are going up 6 percent and you are only getting 4 percent net pricing, where do you make up the rest?" asked Gregg Warren, an analyst at Morningstar.
Rising commodity costs and economically stressed consumers are expected to be the key topics when consumer products company executives meet with analysts at the Consumer Analyst Group of New York conference in Florida that begins Tuesday.
Fed's Stern says rate cuts should protect economy
(Reuters) - The Federal Reserve's interest rate cuts are appropriate to restore stability in financial markets and prevent damage to the broader economy, Minneapolis Fed President Gary Stern said on Tuesday.
"Against the backdrop of the financial shocks that have beset the economy and their implications for the outlook, the reduction in the funds rate target appears wholly appropriate," he said in remarks prepared for delivery to the Financial Planning Association of Minnesota.
The Fed is responsible for restoring financial stability and protecting the broad economy from damage, Stern said.
"Policy is now better positioned to attain these objectives than formerly," he added.
Stern said the current situation is reminiscent of the early 1990s, when the economy faced "headwinds" after the 1990-91 recession, particularly tighter credit and a real estate bust.
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.
Bayer stops late-stage Nexavar trial
(Reuters) - Bayer HealthCare, a U.S.-based unit of Bayer AG (BAYG.DE: Quote, Profile, Research), stopped a late-stage trial of Nexavar in patients with non-small cell lung cancer, after an independent data monitoring committee concluded that the study would not meet the main goal of improved overall survival.
In the late-stage study, patients received Nexavar in combination with chemotherapeutic drugs carboplatin and paclitaxel.
Bayer said higher mortality was observed in a certain subset of patients treated with the combination of Nexavar and the chemotherapeutic drugs, versus those treated with carboplatin and paclitaxel alone.
Bayer and co-developer Onyx Pharmaceuticals Inc (ONXX.O: Quote, Profile, Research) will review the findings of the analysis to determine what, if any, impact they have on other ongoing Nexavar lung cancer trials.
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.
Stocks Rise in Europe, Latin America; Credit Suisse, Vale Climb
(Bloomberg) -- European stocks rose, led by banks and metal producers, on optimism this year's 12 percent drop in the region's benchmark index was too steep given the outlook for sales. Shares in Latin America gained, while Asian equities fell.
Credit Suisse Group rose the most in three weeks in Zurich after Qatar said it's buying shares in the second-biggest Swiss bank, while Barclays Plc and Lloyds TSB Group Plc climbed in London as traders speculated on higher dividends. BHP Billiton Ltd. followed metals prices higher in Europe, while Cia. Vale do Rio Doce rallied in Sao Paulo.
The Dow Jones Stoxx 600 Index added 1.7 percent as of 3:18 p.m. in London, and the MSCI World Index increased 0.4 percent, as gains from Europe and Latin America more than offset declines in Australian bank shares and Japanese insurers. Futures on the Standard & Poor's 500 Index rose 0.8 percent. The U.S. market is closed today for the Presidents' Day holiday.
Qatar's purchase ``gives the market a boost,'' said Salah Seddik, who helps oversee $5.9 billion at Richelieu Finance in Paris. ``There's been some good news in the financial industry. The strong declines we've seen have left some buying opportunities.''
Concern the subprime mortgage slump will lead to more losses sent Europe's Stoxx Banks Index down 17 percent this year. The gauge was valued at 7.5 times profit in the week ended Feb. 8, the lowest since at least 1998, data compiled by Bloomberg show.
The MSCI Latin America Index added 2.1 percent. Brazil's Bovespa index jumped the most in a week, advancing 2 percent, while Chile's Ipsa stock index rose 0.9 percent.
The MSCI Asia Pacific Index lost 0.6 percent today, reversing an earlier gain of 0.8 percent.
European Markets
National benchmarks advanced in all 18 western European markets except Greece. France's CAC 40 rose 1.5 percent, while the U.K.'s FTSE 100 climbed 2 percent. Germany's DAX increased 1.7 percent.
The Stoxx 50 jumped 1.6 percent, as did the Euro Stoxx 50, a measure for the euro region. All of the 18 industry groups in the Stoxx 600 gained, with five stocks rising for each one that fell.
Credit Suisse rose 3.1 percent to 56.7 francs. Qatar is accumulating shares in Credit Suisse and plans to spend as much as $15 billion on European and U.S. bank stocks over the next year, the Gulf state's prime minister said in an interview.
``We have a relation with Credit Suisse and we bought some of the stock from the market, actually, but I cannot say what percentage because still we are in the process,'' Sheikh Hamad bin Jasim bin Jaber al-Thani, who is also chief executive officer of the Qatar Investment Authority, said in an interview late yesterday in Doha.
Barclays, Lloyds TSB
Barclays, the U.K.'s third-biggest bank, jumped 6.8 percent to 456.5 pence. Lloyds TSB, the U.K.'s No. 1 provider of unsecured loans, increased 6.4 percent to 421 pence.
Barclays and Lloyds, which are seeking to quell concern about financial institutions, are expected to report ``robust'' results, the newspaper said. Barclays will lift its dividend by 10 percent on Feb. 19, the Times reported, without saying where it got the information.
Barclays spokesman Robin Tozer and a Lloyds TSB spokesman Leigh Calder declined to comment on the report.
HBOS Plc, the U.K.'s biggest mortgage lender, advanced 4.1 percent to 633.5 pence. Royal Bank of Scotland Group Plc, the U.K.'s second-largest bank, added 2.9 percent to 360.75 pence.
UBS AG fell 1.2 percent to 35.58 francs after a Bear Stearns Cos. analyst downgraded the stock, forecasting more writedowns on debt holdings.
New disclosure of holdings affected by the subprime debacle ``revealed the full and frightening extent of UBS's potential problems,'' Christopher Wheeler wrote, cutting his stock recommendation to ``peer perform'' from ``outperform.''
Steel Price Accord
Vale do Rio Doce surged the most in three weeks, climbing 5.7 percent to 49.15 reais.
Asia's three largest steelmakers agreed to pay Rio de Janeiro- based Vale, the world's biggest iron-ore producer, 65 percent more than last year for the material. Vale said the price increase shows the market is going through ``very tight conditions.''
ArcelorMittal, the world's largest steelmaker, gained 1.4 percent to 48.22 euros. Nippon Steel Corp., the second-biggest, rose 3.2 percent to 575 yen, its highest close since Feb. 7.
``It's good that the price increases are being decided early,'' Alan Coats, an analyst at HSBC Holdings Plc in London, said today in a telephone interview. ``It means they can be passed on.''
BHP Billiton
BHP Billiton, the world's largest mining company, gained 3.9 percent to 1,612 pence. Vedanta Resources Plc, India's biggest copper producer, climbed 3.9 percent to 2,153 pence.
Copper advanced to the highest in almost four months in London after China, the world's largest user, said imports grew 6.6 percent in January from the previous month. The metal for delivery in three months rose 2.3 percent to $7,910 a metric ton, the highest intraday price since Oct. 29. Zinc and lead also climbed.
Australia & New Zealand Banking Group Ltd., Australia's third-largest bank, dropped 6.1 percent to A$22.46, the lowest since September 2005, after its chief executive said a ``bloodbath'' in debt markets will wipe out earnings growth.
Commonwealth Bank of Australia, the country's top mortgage lender, lost 5.1 percent to A$44.
Aioi Insurance Co., Japan's fourth-largest nonlife insurer, tumbled 6.8 percent to 439 yen, after a newspaper said it will have $740 million of subprime-related losses.
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
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
Retail sales rebound
(Reuters) - An unexpected rise in January retail sales, reported by the government on Wednesday, fired up hopes the U.S. economy might skirt recession despite the pressure on consumers from a weakening housing market.
The Commerce Department said sales at U.S. retailers rose 0.3 percent in January to a seasonally adjusted $382.91 billion on higher sales of new cars, gasoline and clothing.
That was sharply contrary to Wall Street analysts' forecasts for a 0.2 percent drop and helped drive stock prices higher in early trading while government bond prices fell.
"The report strengthens the case of those who think we'll skirt a recession," said Jim Awad, chairman of W.P. Stewart & Co. Ltd. in New York, but he cautioned the optimism might be short-lived.
"People will say this is subject to revision and it's inconsistent with other incoming data indicating softness and weakness in the economy," Awad said.
The dollar's value strengthened against other key currencies.
MGIC Loses $1.47 Billion in Quarter, Seeking Capital
(Bloomberg) -- MGIC Investment Corp., the largest U.S. mortgage insurer, fell the most in a month after posting a record quarterly loss of $1.47 billion and said it hired an adviser to raise capital.
MGIC's fourth-quarter net loss was $18.17 a share, compared with a profit of $122 million, or $1.47, a year earlier, the Milwaukee-based company said in a statement today. Excluding investment losses, the insurer lost $18.09 a share, worse than the $8.13 average loss estimate of seven analysts compiled by Bloomberg.
Claims costs, including additions to reserves, surged sevenfold to $1.35 billion, compared with a Jan. 22 company forecast of as much as $1.3 billion. MGIC set aside money for losses on loans that served as collateral for Wall Street securitizations, whose performance ``deteriorated materially.''
``Higher loss severities and higher delinquencies had a material impact,'' Curt Culver, MGIC's chief executive officer, said in the statement. While the company expects to remain unprofitable this year, Culver said MGIC has adequate capital to meet its claim obligations.
MGIC fell $2.03, or 14 percent, to $12.15 at 10:10 a.m. in New York Stock Exchange composite trading. Earlier in the session the company fell as much as 16 percent.
Foreclosure Rates
U.S. foreclosure rates have risen to their highest since at least World War II, and defaults on privately insured U.S. mortgages rose 37 percent in December from the same month a year earlier, according to the Mortgage Insurance Companies of America trade group. Foreclosure rates rose 75 percent in 2007, according to Irvine, California-based RealtyTrac Inc. Mortgage insurers reimburse lenders when borrowers don't repay their debts.
Borrowers who couldn't make higher monthly payments after introductory rates expired propelled a jump in third-quarter claims, leading MGIC and smaller rivals PMI Group Inc. and Radian Group Inc. to report their first money-losing quarters as publicly traded companies.
Payments on about $460 billion of adjustable-rate mortgages are scheduled to be repriced this year, with an additional $420 billion expected for 2011, according to New York-based analysts at Citigroup Inc.
Auction-Bond Failures Roil Munis, Pushing Rates Up
(Bloomberg) -- Bonds sold by U.S. municipal borrowers with rates set through periodic auctions failed to attract enough buyers as banks including Goldman Sachs Group Inc. and Citigroup Inc. that run the bidding wouldn't commit their own capital to the debt.
Rates on $100 million of bonds sold by the Port Authority of New York and New Jersey, with bidding run by Goldman, soared to 20 percent yesterday from 4.3 percent a week ago, according to data compiled by Bloomberg. Presbyterian Healthcare in Albuquerque and New York state's Metropolitan Transportation Authority also experienced failures, officials said.
What began three weeks ago with too few bidders for auction-rate debt backed by relatively small entities, such as Georgetown University and Nevada Power, has widened in recent days to include large issues of state governments, such as New York state's Dormitory Authority. The auction failures provide new indication of Wall Street's unwillingness to commit capital amid $133 billion in credit losses and asset writedowns.
``It's the beginning of the end for the auction-rate market,'' said Matt Fabian, a senior analyst with Concord, Massachusetts-based Municipal Market Advisors. ``Banks have stopped supporting the market.''
Investor demand for the securities has declined on waning confidence in the credit strength of insurers backing the debt, and on reluctance by banks to submit bids and risk ending up with too many of the bonds. Local governments that have borrowed in the $300 billion auction-rate market confront the prospect of higher borrowing costs as economic slowing trims tax revenue.
Auction-Rate Bidding
Auction bonds have interest rates that are 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.
Other borrowers paid higher rates, even if their auctions didn't fail. Wisconsin's 28-day auction yesterday of taxable bonds was set at a 10 percent rate, up from 4.75 percent for identical securities Feb. 7.
Frank Hoadley, Wisconsin's director of capital finance, said he had no advance warning from bankers about the jump in rates. ``We are making decisions'' about converting the auction bonds to different kinds of debt, he said.
Local governments are obliged to pay the high rates until either the auctions start attracting more buyers or they modify the bonds to some other kind of variable-rate debt or a fixed interest rate. Bankers and borrowers have been working on conversion plans for several weeks.
Port Authority Bonds
The 20 percent rate for the $100 million of Port Authority auction bonds will cost it $388,889 until the next weekly auction, up from $83,611 last week. Interest on the bonds is subject to federal income tax.
``We have seen widening spreads, reduced demand for certain auction-rate securities and failed auctions, including some auctions in which Citi acted as broker dealer,'' Danielle Romero-Apsilos, a spokeswoman at New York-based Citigroup, said in a statement.
A Citibank-run auction for the New York state's Dormitory Authority failed yesterday, resulting in an interest rate of 6.26 percent, up from 3.12 percent a week earlier, according to Bloomberg data. Following the auction miss, the interest rate was set at twice one-month Libor, the London interbank offered rate for wholesale bank deposits, according to the official statement for the bonds.
Michael DuVally, a spokesman at New York-based Goldman, declined to comment.
Tuesday, February 12, 2008
Economy near contraction in 1st quarter: Philly Fed
(Reuters) - The U.S. economy will struggle to grow in the first quarter of this year and faces an almost 50 percent chance of contracting, a quarterly survey issued by the Philadelphia Federal Reserve Bank showed on Tuesday.
Unemployment will edge higher given feeble job creation in the first three months of the year as the world's largest economy teeters on the brink of shrinking for a second consecutive quarter.
Forecasters saw a 47 percent probability of contraction in gross domestic product this quarter and a 43 percent chance in the second quarter, levels not seen since the recession in 2001 in the wake of the dot-com bubble, the survey said.
"Although the forecasters' median estimate for real GDP this quarter and the next suggests slow but positive growth, they think the risk of a contraction is high," it said.
"These current-quarter and one-quarter-ahead risks have not been this high since the survey of 2001 Q4, when they were 82 percent and 49 percent, respectively," the survey added.
The 50 forecasters pegged current-quarter growth in real GDP at a rate of just 0.7 percent, a sharp drop from the previous forecast of 2.2 percent.
According to the government's initial estimates, U.S. GDP grew just 0.6 percent in the fourth quarter of 2007.
AIG says potential derivatives loss not material
(Reuters) - American International Group Inc (AIG.N: Quote, Profile, Research) on Tuesday moved to calm investors shaken by its earlier disclosure that derivatives losses could more than triple to about $5 billion, a development that earned it a rebuke from its auditor for a "material weakness" in internal controls.
AIG, the world's largest insurer, said in a statement on Tuesday that the size of any write-down was not expected to be material to the company.
AIG shares gained 4 percent to $46.60, after falling nearly 12 percent on Monday to the stock's lowest level in five years.
Investors pushed the shares down on Monday, after AIG disclosed in a regulatory filing that its mark-to-market unrealized losses on a credit default swap portfolio within its AIG Financial Products unit were expected to be about $4.88 billion through November, compared with an earlier indication of a loss of up to $1.5 billion.
The loss could wipe out AIG's fourth-quarter earnings, some analysts said.
AIG, which is expected to release quarterly results later this month, has not yet disclosed whether it saw further deterioration in December.
"The valuation adjustment as of December 31, 2007, is likely to be significant, and will likely cause AIG to report an accounting loss for the quarter," S&P credit analyst Rodney Clark said.
Vodafone still after Vodacom?
(Fin24) - Any notion that Vodafone will give in to Telkom's rejection of its offer for a controlling stake in Vodacom (the duo's joint cellular business) has been dismissed - at least given Vodafone CE Arun Sarin's declaration that Africa and Asia were firmly on Vodafone's growth radar screen.
Asked by Fin24 to state weather Vodafone would return for Vodacom with a revised offer, Sarin declined to answer before quickly making a dash to the exit door of a packed auditorium with a horde of Vodacom executives in tow.
In a carefully crafted speech steering clear of the company's intention to up its control of Vodacom, Sarin - addressing a large audience at the 3GSM Mobile Word Conference in Barcelona, Spain - said South Africa and India were two countries in emerging markets critical to Vodafone's growth strategy.
"Last year we recorded 15% growth in our South African-based business," said Sarin, adding that with most markets across Europe reaching saturation South Africa and India were critical to the company's growth plans.
In India - a market in which Vodafone made its foray after acquiring a controlling stake in Bharti Telecoms - the company had signed up nearly 1.5m subscribers.
"Our target in that particular market is to sign up close to 300m subscribers over the next three years," said Sarin.
Asked by Fin24 to state weather Vodafone would return for Vodacom with a revised offer, Sarin declined to answer before quickly making a dash to the exit door of a packed auditorium with a horde of Vodacom executives in tow.
Miller Says Microsoft Needs to Enhance Yahoo Offer
(Bloomberg) -- Legg Mason Inc. fund manager Bill Miller, the second-biggest shareholder of Yahoo! Inc., said Microsoft Corp. will need to raise its $44.6 billion offer to buy the Internet company.
``We think Microsoft will need to enhance its offer if it wants to complete a deal,'' Miller, 58, wrote in a Feb. 10 letter to shareholders released today by the Baltimore-based company.
Miller heads Legg Mason Capital Management, which owned about 80 million shares, or 6 percent, of Yahoo on Sept. 30, Bloomberg data show. Microsoft, the biggest software maker, on Jan. 31 bid $31-per-share to buy Yahoo, 62 percent more than the closing price the day before the offer. Yahoo yesterday rejected the bid, saying it ``substantially undervalues'' the company.
``We think this deal is a strategic imperative for Microsoft, and that Yahoo is in a tough spot if it wishes to remain independent,'' Miller wrote. ``It will be hard for Yahoo to come up with alternatives that deliver more value than Microsoft will ultimately be willing to pay.''
Microsoft, based in Redmond, Washington, responded yesterday to the Yahoo board's rejection with a statement calling its offer a ``full and fair proposal.'' The company didn't disclose its next steps and said it is ``moving forward'' with its $31-a-share bid for Sunnyvale, California-based Yahoo.
Miller said Legg Mason's own calculations put Yahoo's value in the range of $40 or more per share.
Countrywide Deal
Miller, whose subsidiary is the biggest holder of Countrywide Financial Corp., said in the letter released today that he hasn't decided to back the bid by Bank of America Corp. to buy the largest U.S. home lender.
The offer has ``truncated'' any gains in Countrywide's shares, Miller said. Bank of America, based in Charlotte, North Carolina, on Jan. 11 agreed to buy Countrywide after the stock lost 85 percent of its value in a year. The bank's takeover bid equates to less than $8 a share for Calabasas, California-based Countrywide.
Paulson, U.S. Banks Forge Foreclosure-Freeze Deal
(Bloomberg) -- Bank of America Corp., Citigroup Inc. and four other U.S. lenders agreed with Treasury Secretary Henry Paulson to take new steps to help borrowers in danger of foreclosure stay in their homes.
Paulson and the banks offered a 30-day freeze on some foreclosures while loan modifications are considered. The Treasury chief, with 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.
``If someone is willing to make a call, to reach out, there's a chance they can save their home,'' Paulson said. ``As our economy works through this difficult period, we will look for additional opportunities to try to avoid preventable foreclosures.''
The program is designed to help a broad range of homeowners, not just subprime debtors who borrowed more than they could afford. Still, it won't help everyone, Paulson said. The U.S. housing correction ``is not over'' and ``the worst is just beginning'' for subprime borrowers who face higher interest rates in the next two years, he said.
In a statement, the banks said the program would start with a letter to homeowners more than 90 days delinquent on payments that lays out procedures for them to ``pause'' the foreclosure process. The homeowner has 10 days to respond to the notice and give additional financial information so the lender is able to weigh new payment options.
Loan Types
Subprime, Alt-A and prime borrowers are eligible, according to the plan. Subprime mortgages are made to borrowers with poor credit or high debt. Alt-A loans are for borrowers who want atypical terms, such as proof-of-income waivers or investment- property collateral, without sufficient compensating attributes, such as larger down payments.
JPMorgan Chase & Co., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. will also participate in the plan. All six are members of Hope Now, the alliance of lenders, trade groups and counselors formed last year to head off a surge of foreclosures by identifying and working with borrowers struggling to meet higher payments.
The Treasury chief said the six banks account for half of the U.S. mortgage market, and called on other lenders to adopt the plan as well.
Rate Freeze
Paulson, who as recently as last month opposed a moratorium on foreclosures, wants lenders to go beyond earlier pledges to freeze subprime interest rates for five years. The deepest housing slump in a generation is threatening consumer spending and the job market, pushing the economy to the verge of a recession.
Jackson said the plan is a ``responsible, timely effort'' aimed at encouraging borrowers to come forward if they're having trouble making payments.
``In some parts of our nation, the foreclosure crisis is have a devastating impact on neighborhoods and communities,'' said Floyd Robinson, head of Bank of America's home-loan business. He stressed that ``homeowners can only take advantage of this program by taking action -- they must respond when they hear from us.''
Democratic Complaints
Paulson last week heard complaints from Democrats in Congress that the number of homeowners receiving relief so far has been insufficient. ``We are now in the midst of one of the most serious economic crises we have seen in recent years,'' Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, said in Boston yesterday.
Federal Reserve officials project about 2 million homeowners face higher mortgage rates over the next two years as their loans reset higher. Economists at the Federal Deposit Insurance Corp. estimate foreclosures this year will be about 1 million more than average, a level that FDIC Chairman Sheila Bair has said ``is just too high.'' They average about 600,000 in a typical year.
``This is good, but we've seen this over and over again,'' said Kathleen Day, a spokeswoman for the Center for Responsible Lending in Washington. ``The fact that they keep having to roll out subsequent rescue plans every few weeks underscores that each plan is inadequate.''
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