May 2010

America as Export Juggernaut Led by Intel With Surging Chip Manufacturing

May 28, 2010

By Timothy R. Homan and Anthony Feld May 28 (Bloomberg) — Intel Corp., the world’s largest maker of computer chips, is increasing production and commanding higher prices as an export boom puts American manufacturing at the forefront of the economic recovery. Santa Clara, California-based Intel ’s factories are operating at 80 percent of capacity, up from a record low of about 50 percent last year in the midst of the recession. The average selling prices of personal computer processors have risen a total of 12 percent over the past two quarters. Overseas demand for U.S.-made goods from semiconductors to printers is boosting the fortunes of manufacturing , which has been shrinking as a proportion of the economy in 13 of the past 14 years. As a result, trade may add to growth for the first time in a post-recession year since World War II, says Morgan Stanley economist Richard Berner . “U.S. manufacturing has really seen a renaissance of sorts driven by improved competitiveness and strength in global markets,” said Joseph Carson , director of economic research at AllianceBernstein LP in New York. “Exports have been the key driver of growth. We think it’s a new trend.” Net exports, or the difference in value between what the U.S. sends overseas and what it buys from abroad, will add about 0.3 percentage point to gross domestic product this year, according to Berner, Morgan Stanley’s co-head of global economics in New York. He forecasts economic growth of 3.4 percent in 2010 after last year’s 2.4 percent contraction. European Crisis Companies from Palo Alto, California-based Hewlett-Packard Co. to Cisco Systems Inc. are boosting sales forecasts in anticipation of stronger demand for semiconductors, computers and software in the world’s fastest-growing economies. In the near term, exports may suffer from a European debt crisis that’s strengthening the dollar and making euro-zone goods cheaper worldwide. Paul Otellini , chief executive officer of Intel, whose chips run more than 80 percent of the world’s personal computers, said this month that the PC market may expand as much as 16 percent in the next four years. The company’s ability to manufacture more advanced chips is putting it further ahead of the competition , he said. Strong demand and tight supply have allowed Intel to limit the discount it gives its customers and to raise average chip prices, according to Dean McCarron , an analyst at Cave Creek, Arizona-based Mercury Research. U.S. exports to China, the third-biggest market for American-made goods, were up 47 percent in the first quarter this year from the first three months of 2009. Shipments to South Korea, the seventh-largest importer of American-made goods, increased 66 percent during the same period, Commerce Department figures show. Business Spending “Consumer and business demand in the rapidly growing economies have become key factors driving their growth,” Morgan Stanley’s Berner wrote in an April 28 research note. “U.S. exporters will be increasingly leveraged to that fast-growing pie as their share of exports to those regions increases, especially in capital goods and consumer business services.” In an interview yesterday, Berner said the dollar’s almost 7 percent gain against the euro this month hasn’t changed his forecast for U.S. export growth. “We had anticipated in the wake of what was going on that we would see further strengthening of the dollar against the euro,” he said. Shares in companies that make computer and technology goods are poised to weather the recent stock-market downturn better than other industries. The Philadelphia Semiconductor Index is up 0.5 percent so far this year, compared with a 1.1 percent decline in the broader Standard & Poor’s 500 Index . Technology stocks have outperformed the S&P 500 over the last year and are trading near a 52-week high on a relative-performance basis. ‘Many Bargains’ “From a longer-term perspective I’m really bullish on this sector,” said Benjamin Tal , a senior economist at CIBC World Markets Inc. in Toronto, who sees “many bargains in the market” among technology and communications companies. “Those big companies in the manufacturing sector in the U.S. are cheap because they will surprise on the upside two, three, four years from now,” he said. Manufacturing, which accounts for 11 percent of the world’s largest economy, down from 12.3 percent in 2006, helped lead the U.S. out of recession in the second half of last year. The industry contributed to more than half of the expansion in the past two quarters, the economy’s best six-month performance since 2003, as companies stabilized inventories after a record drawdown in 2009, according to Commerce Department figures. Export Forecast Exports will keep growing, some manufacturers forecast. San Jose, California-based Cisco, the world’s biggest provider of networking equipment, is calling for sales of at least $10.7 billion in the current quarter, following record revenue in the quarter ended May 1. Sales of semiconductors in the Asia-Pacific region climbed to a record $12.57 billion in March, up 72 percent from a year earlier, according to the Semiconductor Industry Association, based in San Jose. Worldwide sales in March were $23.1 billion, an increase of 4.6 percent from the previous month, the industry group said on May 3. The recovery is “accelerating,” John Chambers , chief executive of Cisco, said on a May 12 conference call. “I’d say now almost without exception, most people are beginning to slowly turn cautiously optimistic.” The expansion is not without risks. Sovereign-debt concerns in Europe are threatening to impede the global recovery, while a decline in the value of the euro makes European exports cheaper. Still, the crisis may not translate into significant losses for U.S. manufacturing, according to AllianceBernstein’s Carson. “Not all changes in exchange rates turn into product races,” Carson said. During the last nine months “the European demand hasn’t been there, but that still has not stopped one of the most powerful export cycles we’ve ever seen,” he said. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Anthony Feld in New York at afeld2@bloomberg.net

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America as Export Juggernaut Led by Intel With Surging Chip Manufacturing

May 28, 2010

By Timothy R. Homan and Anthony Feld May 28 (Bloomberg) — Intel Corp., the world’s largest maker of computer chips, is increasing production and commanding higher prices as an export boom puts American manufacturing at the forefront of the economic recovery. Santa Clara, California-based Intel ’s factories are operating at 80 percent of capacity, up from a record low of about 50 percent last year in the midst of the recession. The average selling prices of personal computer processors have risen a total of 12 percent over the past two quarters. Overseas demand for U.S.-made goods from semiconductors to printers is boosting the fortunes of manufacturing , which has been shrinking as a proportion of the economy in 13 of the past 14 years. As a result, trade may add to growth for the first time in a post-recession year since World War II, says Morgan Stanley economist Richard Berner . “U.S. manufacturing has really seen a renaissance of sorts driven by improved competitiveness and strength in global markets,” said Joseph Carson , director of economic research at AllianceBernstein LP in New York. “Exports have been the key driver of growth. We think it’s a new trend.” Net exports, or the difference in value between what the U.S. sends overseas and what it buys from abroad, will add about 0.3 percentage point to gross domestic product this year, according to Berner, Morgan Stanley’s co-head of global economics in New York. He forecasts economic growth of 3.4 percent in 2010 after last year’s 2.4 percent contraction. European Crisis Companies from Palo Alto, California-based Hewlett-Packard Co. to Cisco Systems Inc. are boosting sales forecasts in anticipation of stronger demand for semiconductors, computers and software in the world’s fastest-growing economies. In the near term, exports may suffer from a European debt crisis that’s strengthening the dollar and making euro-zone goods cheaper worldwide. Paul Otellini , chief executive officer of Intel, whose chips run more than 80 percent of the world’s personal computers, said this month that the PC market may expand as much as 16 percent in the next four years. The company’s ability to manufacture more advanced chips is putting it further ahead of the competition , he said. Strong demand and tight supply have allowed Intel to limit the discount it gives its customers and to raise average chip prices, according to Dean McCarron , an analyst at Cave Creek, Arizona-based Mercury Research. U.S. exports to China, the third-biggest market for American-made goods, were up 47 percent in the first quarter this year from the first three months of 2009. Shipments to South Korea, the seventh-largest importer of American-made goods, increased 66 percent during the same period, Commerce Department figures show. Business Spending “Consumer and business demand in the rapidly growing economies have become key factors driving their growth,” Morgan Stanley’s Berner wrote in an April 28 research note. “U.S. exporters will be increasingly leveraged to that fast-growing pie as their share of exports to those regions increases, especially in capital goods and consumer business services.” In an interview yesterday, Berner said the dollar’s almost 7 percent gain against the euro this month hasn’t changed his forecast for U.S. export growth. “We had anticipated in the wake of what was going on that we would see further strengthening of the dollar against the euro,” he said. Shares in companies that make computer and technology goods are poised to weather the recent stock-market downturn better than other industries. The Philadelphia Semiconductor Index is up 0.5 percent so far this year, compared with a 1.1 percent decline in the broader Standard & Poor’s 500 Index . Technology stocks have outperformed the S&P 500 over the last year and are trading near a 52-week high on a relative-performance basis. ‘Many Bargains’ “From a longer-term perspective I’m really bullish on this sector,” said Benjamin Tal , a senior economist at CIBC World Markets Inc. in Toronto, who sees “many bargains in the market” among technology and communications companies. “Those big companies in the manufacturing sector in the U.S. are cheap because they will surprise on the upside two, three, four years from now,” he said. Manufacturing, which accounts for 11 percent of the world’s largest economy, down from 12.3 percent in 2006, helped lead the U.S. out of recession in the second half of last year. The industry contributed to more than half of the expansion in the past two quarters, the economy’s best six-month performance since 2003, as companies stabilized inventories after a record drawdown in 2009, according to Commerce Department figures. Export Forecast Exports will keep growing, some manufacturers forecast. San Jose, California-based Cisco, the world’s biggest provider of networking equipment, is calling for sales of at least $10.7 billion in the current quarter, following record revenue in the quarter ended May 1. Sales of semiconductors in the Asia-Pacific region climbed to a record $12.57 billion in March, up 72 percent from a year earlier, according to the Semiconductor Industry Association, based in San Jose. Worldwide sales in March were $23.1 billion, an increase of 4.6 percent from the previous month, the industry group said on May 3. The recovery is “accelerating,” John Chambers , chief executive of Cisco, said on a May 12 conference call. “I’d say now almost without exception, most people are beginning to slowly turn cautiously optimistic.” The expansion is not without risks. Sovereign-debt concerns in Europe are threatening to impede the global recovery, while a decline in the value of the euro makes European exports cheaper. Still, the crisis may not translate into significant losses for U.S. manufacturing, according to AllianceBernstein’s Carson. “Not all changes in exchange rates turn into product races,” Carson said. During the last nine months “the European demand hasn’t been there, but that still has not stopped one of the most powerful export cycles we’ve ever seen,” he said. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Anthony Feld in New York at afeld2@bloomberg.net

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America as Export Juggernaut Led by Intel With Surging Chip Manufacturing

May 28, 2010

By Timothy R. Homan and Anthony Feld May 28 (Bloomberg) — Intel Corp., the world’s largest maker of computer chips, is increasing production and commanding higher prices as an export boom puts American manufacturing at the forefront of the economic recovery. Santa Clara, California-based Intel ’s factories are operating at 80 percent of capacity, up from a record low of about 50 percent last year in the midst of the recession. The average selling prices of personal computer processors have risen a total of 12 percent over the past two quarters. Overseas demand for U.S.-made goods from semiconductors to printers is boosting the fortunes of manufacturing , which has been shrinking as a proportion of the economy in 13 of the past 14 years. As a result, trade may add to growth for the first time in a post-recession year since World War II, says Morgan Stanley economist Richard Berner . “U.S. manufacturing has really seen a renaissance of sorts driven by improved competitiveness and strength in global markets,” said Joseph Carson , director of economic research at AllianceBernstein LP in New York. “Exports have been the key driver of growth. We think it’s a new trend.” Net exports, or the difference in value between what the U.S. sends overseas and what it buys from abroad, will add about 0.3 percentage point to gross domestic product this year, according to Berner, Morgan Stanley’s co-head of global economics in New York. He forecasts economic growth of 3.4 percent in 2010 after last year’s 2.4 percent contraction. European Crisis Companies from Palo Alto, California-based Hewlett-Packard Co. to Cisco Systems Inc. are boosting sales forecasts in anticipation of stronger demand for semiconductors, computers and software in the world’s fastest-growing economies. In the near term, exports may suffer from a European debt crisis that’s strengthening the dollar and making euro-zone goods cheaper worldwide. Paul Otellini , chief executive officer of Intel, whose chips run more than 80 percent of the world’s personal computers, said this month that the PC market may expand as much as 16 percent in the next four years. The company’s ability to manufacture more advanced chips is putting it further ahead of the competition , he said. Strong demand and tight supply have allowed Intel to limit the discount it gives its customers and to raise average chip prices, according to Dean McCarron , an analyst at Cave Creek, Arizona-based Mercury Research. U.S. exports to China, the third-biggest market for American-made goods, were up 47 percent in the first quarter this year from the first three months of 2009. Shipments to South Korea, the seventh-largest importer of American-made goods, increased 66 percent during the same period, Commerce Department figures show. Business Spending “Consumer and business demand in the rapidly growing economies have become key factors driving their growth,” Morgan Stanley’s Berner wrote in an April 28 research note. “U.S. exporters will be increasingly leveraged to that fast-growing pie as their share of exports to those regions increases, especially in capital goods and consumer business services.” In an interview yesterday, Berner said the dollar’s almost 7 percent gain against the euro this month hasn’t changed his forecast for U.S. export growth. “We had anticipated in the wake of what was going on that we would see further strengthening of the dollar against the euro,” he said. Shares in companies that make computer and technology goods are poised to weather the recent stock-market downturn better than other industries. The Philadelphia Semiconductor Index is up 0.5 percent so far this year, compared with a 1.1 percent decline in the broader Standard & Poor’s 500 Index . Technology stocks have outperformed the S&P 500 over the last year and are trading near a 52-week high on a relative-performance basis. ‘Many Bargains’ “From a longer-term perspective I’m really bullish on this sector,” said Benjamin Tal , a senior economist at CIBC World Markets Inc. in Toronto, who sees “many bargains in the market” among technology and communications companies. “Those big companies in the manufacturing sector in the U.S. are cheap because they will surprise on the upside two, three, four years from now,” he said. Manufacturing, which accounts for 11 percent of the world’s largest economy, down from 12.3 percent in 2006, helped lead the U.S. out of recession in the second half of last year. The industry contributed to more than half of the expansion in the past two quarters, the economy’s best six-month performance since 2003, as companies stabilized inventories after a record drawdown in 2009, according to Commerce Department figures. Export Forecast Exports will keep growing, some manufacturers forecast. San Jose, California-based Cisco, the world’s biggest provider of networking equipment, is calling for sales of at least $10.7 billion in the current quarter, following record revenue in the quarter ended May 1. Sales of semiconductors in the Asia-Pacific region climbed to a record $12.57 billion in March, up 72 percent from a year earlier, according to the Semiconductor Industry Association, based in San Jose. Worldwide sales in March were $23.1 billion, an increase of 4.6 percent from the previous month, the industry group said on May 3. The recovery is “accelerating,” John Chambers , chief executive of Cisco, said on a May 12 conference call. “I’d say now almost without exception, most people are beginning to slowly turn cautiously optimistic.” The expansion is not without risks. Sovereign-debt concerns in Europe are threatening to impede the global recovery, while a decline in the value of the euro makes European exports cheaper. Still, the crisis may not translate into significant losses for U.S. manufacturing, according to AllianceBernstein’s Carson. “Not all changes in exchange rates turn into product races,” Carson said. During the last nine months “the European demand hasn’t been there, but that still has not stopped one of the most powerful export cycles we’ve ever seen,” he said. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Anthony Feld in New York at afeld2@bloomberg.net

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Shell Will Acquire East Resources Units for $4.7 Billion to Gain Shale Gas

May 28, 2010

By Fred Pals May 28 (Bloomberg) — Royal Dutch Shell Plc , Europe’s largest energy producer, agreed to buy most of closely-held East Resources Inc. for $4.7 billion in cash, expanding its holdings of U.S. shale gas deposits. As part of the deal, Shell will obtain new positions in “high potential” U.S. shale gas acreage, in the Marcellus and Eagle Ford plays, according to a statement today. Shell is catching up with Exxon Mobil Corp. and BP Plc in snapping up unconventional gas reserves in anticipation prices for the cleaner-burning fuel will recover as governments curb carbon dioxide emissions. The Marcellus Shale, which stretches into New York, may hold 262 trillion cubic feet of recoverable gas, making it the biggest known deposit of the heating and power-plant fuel, the U.S. Energy Department estimates. “They’ve seen others take material positions in U.S. gas, and this is one way they can also play a part in that business,” said Jason Kenney , head of oil and gas research at ING Commercial Banking in Edinburgh. The acquisition is the second-biggest oil and gas deal this year, after BP’s acquisition of deepwater assets from Devon Energy Corp. for $7 billion in March, according to Bloomberg data. Shell said it was buying subsidiaries that own most of East Resources from the company itself, as well as KKR & Co. and its advisors Jefferies & Co. Unconventional Gas Unconventional gas is the industry term to describe the fuel trapped in shale formations, coal beds and impermeable sandstone rock. BP Chief Executive Officer Tony Hayward has described shale gas as a “game changer” that allowed the U.S. to overtake Russia in terms of overall gas production last year. Today’s acquisition brings Shell’s total tight gas acreage in the U.S. to about 3.6 million acres. It follows Shell’s joint acquisition of Australia’s Arrow Energy Ltd. in March for A$3.5 billion ($3 billion) with PetroChina Co. The Hague-based company expects its share of gas in total output to rise to 52 percent in 2012. “We are enhancing our world-wide upstream portfolio for profitable growth, through exploration and focused acquisitions, and through divestment of non-core positions,” Chief Executive Officer Peter Voser said in today’s statement. Drilling Programs East Resources owns and operates more than 2,500 producing oil and gas wells in New York, Pennsylvania, West Virginia, and Colorado and is actively exploring drilling programs in Wyoming, according to the website of the Pennsylvania-based company. It has been operating in the Marcellus Shale Area for 25 years. Exxon Mobil blazed the trail into gas with its $30 billion acquisition of XTO Energy Inc. in December. Total SA in January accelerated its expansion into gas with the $2.25 billion purchase of U.S. assets from Chesapeake Energy Corp. There should be a “substantial increase” in gas from unconventional sources such as shale rock and coal beds, the U.S. Energy Information Administration said May 25. Unconventional sources should account for 26 percent of gas production in the U.S. by 2035, 63 percent in Canada and 56 percent in China, the EIA said. To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

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Shell Will Acquire East Resources Units for $4.7 Billion to Gain Shale Gas

May 28, 2010

By Fred Pals May 28 (Bloomberg) — Royal Dutch Shell Plc , Europe’s largest energy producer, agreed to buy most of closely-held East Resources Inc. for $4.7 billion in cash, expanding its holdings of U.S. shale gas deposits. As part of the deal, Shell will obtain new positions in “high potential” U.S. shale gas acreage, in the Marcellus and Eagle Ford plays, according to a statement today. Shell is catching up with Exxon Mobil Corp. and BP Plc in snapping up unconventional gas reserves in anticipation prices for the cleaner-burning fuel will recover as governments curb carbon dioxide emissions. The Marcellus Shale, which stretches into New York, may hold 262 trillion cubic feet of recoverable gas, making it the biggest known deposit of the heating and power-plant fuel, the U.S. Energy Department estimates. “They’ve seen others take material positions in U.S. gas, and this is one way they can also play a part in that business,” said Jason Kenney , head of oil and gas research at ING Commercial Banking in Edinburgh. The acquisition is the second-biggest oil and gas deal this year, after BP’s acquisition of deepwater assets from Devon Energy Corp. for $7 billion in March, according to Bloomberg data. Shell said it was buying subsidiaries that own most of East Resources from the company itself, as well as KKR & Co. and its advisors Jefferies & Co. Unconventional Gas Unconventional gas is the industry term to describe the fuel trapped in shale formations, coal beds and impermeable sandstone rock. BP Chief Executive Officer Tony Hayward has described shale gas as a “game changer” that allowed the U.S. to overtake Russia in terms of overall gas production last year. Today’s acquisition brings Shell’s total tight gas acreage in the U.S. to about 3.6 million acres. It follows Shell’s joint acquisition of Australia’s Arrow Energy Ltd. in March for A$3.5 billion ($3 billion) with PetroChina Co. The Hague-based company expects its share of gas in total output to rise to 52 percent in 2012. “We are enhancing our world-wide upstream portfolio for profitable growth, through exploration and focused acquisitions, and through divestment of non-core positions,” Chief Executive Officer Peter Voser said in today’s statement. Drilling Programs East Resources owns and operates more than 2,500 producing oil and gas wells in New York, Pennsylvania, West Virginia, and Colorado and is actively exploring drilling programs in Wyoming, according to the website of the Pennsylvania-based company. It has been operating in the Marcellus Shale Area for 25 years. Exxon Mobil blazed the trail into gas with its $30 billion acquisition of XTO Energy Inc. in December. Total SA in January accelerated its expansion into gas with the $2.25 billion purchase of U.S. assets from Chesapeake Energy Corp. There should be a “substantial increase” in gas from unconventional sources such as shale rock and coal beds, the U.S. Energy Information Administration said May 25. Unconventional sources should account for 26 percent of gas production in the U.S. by 2035, 63 percent in Canada and 56 percent in China, the EIA said. To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

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Shell Will Acquire East Resources Units for $4.7 Billion to Gain Shale Gas

May 28, 2010

By Fred Pals May 28 (Bloomberg) — Royal Dutch Shell Plc , Europe’s largest energy producer, agreed to buy most of closely-held East Resources Inc. for $4.7 billion in cash, expanding its holdings of U.S. shale gas deposits. As part of the deal, Shell will obtain new positions in “high potential” U.S. shale gas acreage, in the Marcellus and Eagle Ford plays, according to a statement today. Shell is catching up with Exxon Mobil Corp. and BP Plc in snapping up unconventional gas reserves in anticipation prices for the cleaner-burning fuel will recover as governments curb carbon dioxide emissions. The Marcellus Shale, which stretches into New York, may hold 262 trillion cubic feet of recoverable gas, making it the biggest known deposit of the heating and power-plant fuel, the U.S. Energy Department estimates. “They’ve seen others take material positions in U.S. gas, and this is one way they can also play a part in that business,” said Jason Kenney , head of oil and gas research at ING Commercial Banking in Edinburgh. The acquisition is the second-biggest oil and gas deal this year, after BP’s acquisition of deepwater assets from Devon Energy Corp. for $7 billion in March, according to Bloomberg data. Shell said it was buying subsidiaries that own most of East Resources from the company itself, as well as KKR & Co. and its advisors Jefferies & Co. Unconventional Gas Unconventional gas is the industry term to describe the fuel trapped in shale formations, coal beds and impermeable sandstone rock. BP Chief Executive Officer Tony Hayward has described shale gas as a “game changer” that allowed the U.S. to overtake Russia in terms of overall gas production last year. Today’s acquisition brings Shell’s total tight gas acreage in the U.S. to about 3.6 million acres. It follows Shell’s joint acquisition of Australia’s Arrow Energy Ltd. in March for A$3.5 billion ($3 billion) with PetroChina Co. The Hague-based company expects its share of gas in total output to rise to 52 percent in 2012. “We are enhancing our world-wide upstream portfolio for profitable growth, through exploration and focused acquisitions, and through divestment of non-core positions,” Chief Executive Officer Peter Voser said in today’s statement. Drilling Programs East Resources owns and operates more than 2,500 producing oil and gas wells in New York, Pennsylvania, West Virginia, and Colorado and is actively exploring drilling programs in Wyoming, according to the website of the Pennsylvania-based company. It has been operating in the Marcellus Shale Area for 25 years. Exxon Mobil blazed the trail into gas with its $30 billion acquisition of XTO Energy Inc. in December. Total SA in January accelerated its expansion into gas with the $2.25 billion purchase of U.S. assets from Chesapeake Energy Corp. There should be a “substantial increase” in gas from unconventional sources such as shale rock and coal beds, the U.S. Energy Information Administration said May 25. Unconventional sources should account for 26 percent of gas production in the U.S. by 2035, 63 percent in Canada and 56 percent in China, the EIA said. To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

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Shell Will Acquire East Resources Units for $4.7 Billion to Gain Shale Gas

May 28, 2010

By Fred Pals May 28 (Bloomberg) — Royal Dutch Shell Plc , Europe’s largest energy producer, agreed to buy most of closely-held East Resources Inc. for $4.7 billion in cash, expanding its holdings of U.S. shale gas deposits. As part of the deal, Shell will obtain new positions in “high potential” U.S. shale gas acreage, in the Marcellus and Eagle Ford plays, according to a statement today. Shell is catching up with Exxon Mobil Corp. and BP Plc in snapping up unconventional gas reserves in anticipation prices for the cleaner-burning fuel will recover as governments curb carbon dioxide emissions. The Marcellus Shale, which stretches into New York, may hold 262 trillion cubic feet of recoverable gas, making it the biggest known deposit of the heating and power-plant fuel, the U.S. Energy Department estimates. “They’ve seen others take material positions in U.S. gas, and this is one way they can also play a part in that business,” said Jason Kenney , head of oil and gas research at ING Commercial Banking in Edinburgh. The acquisition is the second-biggest oil and gas deal this year, after BP’s acquisition of deepwater assets from Devon Energy Corp. for $7 billion in March, according to Bloomberg data. Shell said it was buying subsidiaries that own most of East Resources from the company itself, as well as KKR & Co. and its advisors Jefferies & Co. Unconventional Gas Unconventional gas is the industry term to describe the fuel trapped in shale formations, coal beds and impermeable sandstone rock. BP Chief Executive Officer Tony Hayward has described shale gas as a “game changer” that allowed the U.S. to overtake Russia in terms of overall gas production last year. Today’s acquisition brings Shell’s total tight gas acreage in the U.S. to about 3.6 million acres. It follows Shell’s joint acquisition of Australia’s Arrow Energy Ltd. in March for A$3.5 billion ($3 billion) with PetroChina Co. The Hague-based company expects its share of gas in total output to rise to 52 percent in 2012. “We are enhancing our world-wide upstream portfolio for profitable growth, through exploration and focused acquisitions, and through divestment of non-core positions,” Chief Executive Officer Peter Voser said in today’s statement. Drilling Programs East Resources owns and operates more than 2,500 producing oil and gas wells in New York, Pennsylvania, West Virginia, and Colorado and is actively exploring drilling programs in Wyoming, according to the website of the Pennsylvania-based company. It has been operating in the Marcellus Shale Area for 25 years. Exxon Mobil blazed the trail into gas with its $30 billion acquisition of XTO Energy Inc. in December. Total SA in January accelerated its expansion into gas with the $2.25 billion purchase of U.S. assets from Chesapeake Energy Corp. There should be a “substantial increase” in gas from unconventional sources such as shale rock and coal beds, the U.S. Energy Information Administration said May 25. Unconventional sources should account for 26 percent of gas production in the U.S. by 2035, 63 percent in Canada and 56 percent in China, the EIA said. To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

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Prudential Discussing Price Cut for AIG Asia Unit After Slump Soured Deal

May 28, 2010

By Kevin Crowley May 28 (Bloomberg) — Prudential Plc , the U.K. insurer seeking to buy American International Group Inc. ’s Asian unit in a $35.5 billion acquisition, said it’s talking with AIG about changing the terms of the deal. Discussions between the companies “may or may not lead to a change in the terms of the combination,” Prudential said today in a statement. Chief Executive Officer Tidjane Thiam, 47, was in New York yesterday to make his case to executives that the price for AIA should be cut, a person with knowledge of the situation said. Thiam is facing criticism from major investors as he asks for $21 billion, the biggest rights offer for an acquisition on record. Prudential’s market value is 13.8 billion pounds ($20 billion). The deal has already been delayed by the U.K. regulator over concerns about the insurer’s capital reserves and the biggest decline in equity markets since the financial crisis has dampened investors’ enthusiasm for the takeover. “It’s probably the least ideal market to raise capital,” said James Buckley , a London-based fund manager at Baring Asset Management Ltd. who helps oversee $44 billion, including Prudential stock. “The market is not completely closed for small rights offers, but for major deals like Prudential, it’s inevitably tough.” Investors owning as much as 20 percent of Prudential stock plan to vote against the takeover at the annual general meeting on June 7, Neptune Investment Management Ltd. , a London-based shareholder, said this week. Thiam needs 75 percent of investors to support the rights offer for the deal to succeed. BlackRock, Fidelity BlackRock Inc. and Fidelity Investments are among major Prudential shareholders that have voiced concern the deal is too expensive, said the person, who declined to be identified because the discussions are private. Some shareholders are demanding a reduction to as low as $30 billion, a price AIG’s board is unlikely to approve, the person said. “We have a signed agreement with Prudential, and we expect them to use their best efforts to live up to it,” Mark Herr , a spokesman for New York-based AIG, said late yesterday. Speculation the deal would collapse was “unfounded,” Prudential spokesman Ed Brewster said earlier this week. “The acquisition of AIA by Prudential represents a compelling combination that can deliver very attractive long-term returns to our shareholders,” he said. Public Offering Option The U.S. Treasury Department, which helped fund the $182.3 billion bailout of AIG, hasn’t asked the company to find a compromise on the AIA deal, spokesman Andrew Williams said in an e-mail. He commented after the Daily Telegraph reported that the Treasury encouraged the insurer to negotiate to preserve the takeover of AIA. AIG, which is selling assets to repay the U.S. bailout, had been planning a public offering of AIA until announcing the Prudential deal in March. AIG could return to the public- offering option if Prudential shareholders reject the deal, Jim Millstein , the Treasury’s chief restructuring officer, said this week in Washington. “It would certainly be a mistake to not be willing to renegotiate,” said Angelo Graci , managing director at Chapdelaine Credit Partners in New York. “There are meaningful risks to going back and pursuing an IPO; it would take longer, and the valuation would have a significant amount of uncertainty.” AIG is being advised by Blackstone Group LP, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg. Prudential is being advised by Credit Suisse Group AG, JPMorgan Cazenove, Lazard LLC and Nomura Holdings Inc., the data show. Funding Plans Prudential plans to fund the AIA purchase through the $21 billion rights offer, including fees to banks, $10.5 billion of new shares and other securities and by selling debt. The offer is the biggest in U.K. corporate history. Capital Research & Management Co., Prudential’s biggest shareholder, would have to pay about 1.89 billion pounds to take up its rights in full, data compiled by Bloomberg show. The next three biggest holders, Blackrock, Legal & General Group Plc and Norges Bank, would pay a total of about 1.96 billion pounds for their full allocation of shares. Not all Prudential’s directors plan to take up their rights in full, Chairman Harvey McGrath said this week. Michael McLintock , CEO of Prudential’s fund-management unit, would have to pay about 3.4 million pounds to fully back the transaction. “In uncertain times investors aren’t as willing to take as much risk, and it makes it harder to raise funds for expansion,” said Peter Braendle , who helps oversee about $51 billion at Swisscanto Asset Management AG in Zurich and hasn’t decided whether he’ll back the rights offer. “Investors prefer to have a bit more cash.” Market Concern Prudential, which yesterday posted its steepest increase since August, was down 0.8 percent at 543 pence as of 9:43 a.m. in London trading. The insurer’s share price was 602.5 pence on Feb. 26, the last trading day before the deal was announced. Prudential shares were suspended in Hong Kong earlier today before the company’s statement. The combined Prudential-AIA would be the largest life insurer in Hong Kong, as well as in Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam. Paying $35.5 billion for AIA will create an entity worth $60 billion by 2013, Thiam said this month. “The deal raises the question why the company is trying to pursue it if a substantial number of shareholders are opposing it,” said Tom Kirchmaier , a fellow at the London School of Economics. “For me the concerns in the debt market just mirror those in the equity market, and the market might just kill a deal which it considers a bad deal.” To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

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Prudential Discussing Price Cut for AIG Asia Unit After Slump Soured Deal

May 28, 2010

By Kevin Crowley May 28 (Bloomberg) — Prudential Plc , the U.K. insurer seeking to buy American International Group Inc. ’s Asian unit in a $35.5 billion acquisition, said it’s talking with AIG about changing the terms of the deal. Discussions between the companies “may or may not lead to a change in the terms of the combination,” Prudential said today in a statement. Chief Executive Officer Tidjane Thiam, 47, was in New York yesterday to make his case to executives that the price for AIA should be cut, a person with knowledge of the situation said. Thiam is facing criticism from major investors as he asks for $21 billion, the biggest rights offer for an acquisition on record. Prudential’s market value is 13.8 billion pounds ($20 billion). The deal has already been delayed by the U.K. regulator over concerns about the insurer’s capital reserves and the biggest decline in equity markets since the financial crisis has dampened investors’ enthusiasm for the takeover. “It’s probably the least ideal market to raise capital,” said James Buckley , a London-based fund manager at Baring Asset Management Ltd. who helps oversee $44 billion, including Prudential stock. “The market is not completely closed for small rights offers, but for major deals like Prudential, it’s inevitably tough.” Investors owning as much as 20 percent of Prudential stock plan to vote against the takeover at the annual general meeting on June 7, Neptune Investment Management Ltd. , a London-based shareholder, said this week. Thiam needs 75 percent of investors to support the rights offer for the deal to succeed. BlackRock, Fidelity BlackRock Inc. and Fidelity Investments are among major Prudential shareholders that have voiced concern the deal is too expensive, said the person, who declined to be identified because the discussions are private. Some shareholders are demanding a reduction to as low as $30 billion, a price AIG’s board is unlikely to approve, the person said. “We have a signed agreement with Prudential, and we expect them to use their best efforts to live up to it,” Mark Herr , a spokesman for New York-based AIG, said late yesterday. Speculation the deal would collapse was “unfounded,” Prudential spokesman Ed Brewster said earlier this week. “The acquisition of AIA by Prudential represents a compelling combination that can deliver very attractive long-term returns to our shareholders,” he said. Public Offering Option The U.S. Treasury Department, which helped fund the $182.3 billion bailout of AIG, hasn’t asked the company to find a compromise on the AIA deal, spokesman Andrew Williams said in an e-mail. He commented after the Daily Telegraph reported that the Treasury encouraged the insurer to negotiate to preserve the takeover of AIA. AIG, which is selling assets to repay the U.S. bailout, had been planning a public offering of AIA until announcing the Prudential deal in March. AIG could return to the public- offering option if Prudential shareholders reject the deal, Jim Millstein , the Treasury’s chief restructuring officer, said this week in Washington. “It would certainly be a mistake to not be willing to renegotiate,” said Angelo Graci , managing director at Chapdelaine Credit Partners in New York. “There are meaningful risks to going back and pursuing an IPO; it would take longer, and the valuation would have a significant amount of uncertainty.” AIG is being advised by Blackstone Group LP, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg. Prudential is being advised by Credit Suisse Group AG, JPMorgan Cazenove, Lazard LLC and Nomura Holdings Inc., the data show. Funding Plans Prudential plans to fund the AIA purchase through the $21 billion rights offer, including fees to banks, $10.5 billion of new shares and other securities and by selling debt. The offer is the biggest in U.K. corporate history. Capital Research & Management Co., Prudential’s biggest shareholder, would have to pay about 1.89 billion pounds to take up its rights in full, data compiled by Bloomberg show. The next three biggest holders, Blackrock, Legal & General Group Plc and Norges Bank, would pay a total of about 1.96 billion pounds for their full allocation of shares. Not all Prudential’s directors plan to take up their rights in full, Chairman Harvey McGrath said this week. Michael McLintock , CEO of Prudential’s fund-management unit, would have to pay about 3.4 million pounds to fully back the transaction. “In uncertain times investors aren’t as willing to take as much risk, and it makes it harder to raise funds for expansion,” said Peter Braendle , who helps oversee about $51 billion at Swisscanto Asset Management AG in Zurich and hasn’t decided whether he’ll back the rights offer. “Investors prefer to have a bit more cash.” Market Concern Prudential, which yesterday posted its steepest increase since August, was down 0.8 percent at 543 pence as of 9:43 a.m. in London trading. The insurer’s share price was 602.5 pence on Feb. 26, the last trading day before the deal was announced. Prudential shares were suspended in Hong Kong earlier today before the company’s statement. The combined Prudential-AIA would be the largest life insurer in Hong Kong, as well as in Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam. Paying $35.5 billion for AIA will create an entity worth $60 billion by 2013, Thiam said this month. “The deal raises the question why the company is trying to pursue it if a substantial number of shareholders are opposing it,” said Tom Kirchmaier , a fellow at the London School of Economics. “For me the concerns in the debt market just mirror those in the equity market, and the market might just kill a deal which it considers a bad deal.” To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

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Prudential Discussing Price Cut for AIG Asia Unit After Slump Soured Deal

May 28, 2010

By Kevin Crowley May 28 (Bloomberg) — Prudential Plc , the U.K. insurer seeking to buy American International Group Inc. ’s Asian unit in a $35.5 billion acquisition, said it’s talking with AIG about changing the terms of the deal. Discussions between the companies “may or may not lead to a change in the terms of the combination,” Prudential said today in a statement. Chief Executive Officer Tidjane Thiam, 47, was in New York yesterday to make his case to executives that the price for AIA should be cut, a person with knowledge of the situation said. Thiam is facing criticism from major investors as he asks for $21 billion, the biggest rights offer for an acquisition on record. Prudential’s market value is 13.8 billion pounds ($20 billion). The deal has already been delayed by the U.K. regulator over concerns about the insurer’s capital reserves and the biggest decline in equity markets since the financial crisis has dampened investors’ enthusiasm for the takeover. “It’s probably the least ideal market to raise capital,” said James Buckley , a London-based fund manager at Baring Asset Management Ltd. who helps oversee $44 billion, including Prudential stock. “The market is not completely closed for small rights offers, but for major deals like Prudential, it’s inevitably tough.” Investors owning as much as 20 percent of Prudential stock plan to vote against the takeover at the annual general meeting on June 7, Neptune Investment Management Ltd. , a London-based shareholder, said this week. Thiam needs 75 percent of investors to support the rights offer for the deal to succeed. BlackRock, Fidelity BlackRock Inc. and Fidelity Investments are among major Prudential shareholders that have voiced concern the deal is too expensive, said the person, who declined to be identified because the discussions are private. Some shareholders are demanding a reduction to as low as $30 billion, a price AIG’s board is unlikely to approve, the person said. “We have a signed agreement with Prudential, and we expect them to use their best efforts to live up to it,” Mark Herr , a spokesman for New York-based AIG, said late yesterday. Speculation the deal would collapse was “unfounded,” Prudential spokesman Ed Brewster said earlier this week. “The acquisition of AIA by Prudential represents a compelling combination that can deliver very attractive long-term returns to our shareholders,” he said. Public Offering Option The U.S. Treasury Department, which helped fund the $182.3 billion bailout of AIG, hasn’t asked the company to find a compromise on the AIA deal, spokesman Andrew Williams said in an e-mail. He commented after the Daily Telegraph reported that the Treasury encouraged the insurer to negotiate to preserve the takeover of AIA. AIG, which is selling assets to repay the U.S. bailout, had been planning a public offering of AIA until announcing the Prudential deal in March. AIG could return to the public- offering option if Prudential shareholders reject the deal, Jim Millstein , the Treasury’s chief restructuring officer, said this week in Washington. “It would certainly be a mistake to not be willing to renegotiate,” said Angelo Graci , managing director at Chapdelaine Credit Partners in New York. “There are meaningful risks to going back and pursuing an IPO; it would take longer, and the valuation would have a significant amount of uncertainty.” AIG is being advised by Blackstone Group LP, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg. Prudential is being advised by Credit Suisse Group AG, JPMorgan Cazenove, Lazard LLC and Nomura Holdings Inc., the data show. Funding Plans Prudential plans to fund the AIA purchase through the $21 billion rights offer, including fees to banks, $10.5 billion of new shares and other securities and by selling debt. The offer is the biggest in U.K. corporate history. Capital Research & Management Co., Prudential’s biggest shareholder, would have to pay about 1.89 billion pounds to take up its rights in full, data compiled by Bloomberg show. The next three biggest holders, Blackrock, Legal & General Group Plc and Norges Bank, would pay a total of about 1.96 billion pounds for their full allocation of shares. Not all Prudential’s directors plan to take up their rights in full, Chairman Harvey McGrath said this week. Michael McLintock , CEO of Prudential’s fund-management unit, would have to pay about 3.4 million pounds to fully back the transaction. “In uncertain times investors aren’t as willing to take as much risk, and it makes it harder to raise funds for expansion,” said Peter Braendle , who helps oversee about $51 billion at Swisscanto Asset Management AG in Zurich and hasn’t decided whether he’ll back the rights offer. “Investors prefer to have a bit more cash.” Market Concern Prudential, which yesterday posted its steepest increase since August, was down 0.8 percent at 543 pence as of 9:43 a.m. in London trading. The insurer’s share price was 602.5 pence on Feb. 26, the last trading day before the deal was announced. Prudential shares were suspended in Hong Kong earlier today before the company’s statement. The combined Prudential-AIA would be the largest life insurer in Hong Kong, as well as in Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam. Paying $35.5 billion for AIA will create an entity worth $60 billion by 2013, Thiam said this month. “The deal raises the question why the company is trying to pursue it if a substantial number of shareholders are opposing it,” said Tom Kirchmaier , a fellow at the London School of Economics. “For me the concerns in the debt market just mirror those in the equity market, and the market might just kill a deal which it considers a bad deal.” To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

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Prudential Discussing Price Cut for AIG Asia Unit After Slump Soured Deal

May 28, 2010

By Kevin Crowley May 28 (Bloomberg) — Prudential Plc , the U.K. insurer seeking to buy American International Group Inc. ’s Asian unit in a $35.5 billion acquisition, said it’s talking with AIG about changing the terms of the deal. Discussions between the companies “may or may not lead to a change in the terms of the combination,” Prudential said today in a statement. Chief Executive Officer Tidjane Thiam, 47, was in New York yesterday to make his case to executives that the price for AIA should be cut, a person with knowledge of the situation said. Thiam is facing criticism from major investors as he asks for $21 billion, the biggest rights offer for an acquisition on record. Prudential’s market value is 13.8 billion pounds ($20 billion). The deal has already been delayed by the U.K. regulator over concerns about the insurer’s capital reserves and the biggest decline in equity markets since the financial crisis has dampened investors’ enthusiasm for the takeover. “It’s probably the least ideal market to raise capital,” said James Buckley , a London-based fund manager at Baring Asset Management Ltd. who helps oversee $44 billion, including Prudential stock. “The market is not completely closed for small rights offers, but for major deals like Prudential, it’s inevitably tough.” Investors owning as much as 20 percent of Prudential stock plan to vote against the takeover at the annual general meeting on June 7, Neptune Investment Management Ltd. , a London-based shareholder, said this week. Thiam needs 75 percent of investors to support the rights offer for the deal to succeed. BlackRock, Fidelity BlackRock Inc. and Fidelity Investments are among major Prudential shareholders that have voiced concern the deal is too expensive, said the person, who declined to be identified because the discussions are private. Some shareholders are demanding a reduction to as low as $30 billion, a price AIG’s board is unlikely to approve, the person said. “We have a signed agreement with Prudential, and we expect them to use their best efforts to live up to it,” Mark Herr , a spokesman for New York-based AIG, said late yesterday. Speculation the deal would collapse was “unfounded,” Prudential spokesman Ed Brewster said earlier this week. “The acquisition of AIA by Prudential represents a compelling combination that can deliver very attractive long-term returns to our shareholders,” he said. Public Offering Option The U.S. Treasury Department, which helped fund the $182.3 billion bailout of AIG, hasn’t asked the company to find a compromise on the AIA deal, spokesman Andrew Williams said in an e-mail. He commented after the Daily Telegraph reported that the Treasury encouraged the insurer to negotiate to preserve the takeover of AIA. AIG, which is selling assets to repay the U.S. bailout, had been planning a public offering of AIA until announcing the Prudential deal in March. AIG could return to the public- offering option if Prudential shareholders reject the deal, Jim Millstein , the Treasury’s chief restructuring officer, said this week in Washington. “It would certainly be a mistake to not be willing to renegotiate,” said Angelo Graci , managing director at Chapdelaine Credit Partners in New York. “There are meaningful risks to going back and pursuing an IPO; it would take longer, and the valuation would have a significant amount of uncertainty.” AIG is being advised by Blackstone Group LP, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg. Prudential is being advised by Credit Suisse Group AG, JPMorgan Cazenove, Lazard LLC and Nomura Holdings Inc., the data show. Funding Plans Prudential plans to fund the AIA purchase through the $21 billion rights offer, including fees to banks, $10.5 billion of new shares and other securities and by selling debt. The offer is the biggest in U.K. corporate history. Capital Research & Management Co., Prudential’s biggest shareholder, would have to pay about 1.89 billion pounds to take up its rights in full, data compiled by Bloomberg show. The next three biggest holders, Blackrock, Legal & General Group Plc and Norges Bank, would pay a total of about 1.96 billion pounds for their full allocation of shares. Not all Prudential’s directors plan to take up their rights in full, Chairman Harvey McGrath said this week. Michael McLintock , CEO of Prudential’s fund-management unit, would have to pay about 3.4 million pounds to fully back the transaction. “In uncertain times investors aren’t as willing to take as much risk, and it makes it harder to raise funds for expansion,” said Peter Braendle , who helps oversee about $51 billion at Swisscanto Asset Management AG in Zurich and hasn’t decided whether he’ll back the rights offer. “Investors prefer to have a bit more cash.” Market Concern Prudential, which yesterday posted its steepest increase since August, was down 0.8 percent at 543 pence as of 9:43 a.m. in London trading. The insurer’s share price was 602.5 pence on Feb. 26, the last trading day before the deal was announced. Prudential shares were suspended in Hong Kong earlier today before the company’s statement. The combined Prudential-AIA would be the largest life insurer in Hong Kong, as well as in Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam. Paying $35.5 billion for AIA will create an entity worth $60 billion by 2013, Thiam said this month. “The deal raises the question why the company is trying to pursue it if a substantial number of shareholders are opposing it,” said Tom Kirchmaier , a fellow at the London School of Economics. “For me the concerns in the debt market just mirror those in the equity market, and the market might just kill a deal which it considers a bad deal.” To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

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Stocks Extend Rebound From Nine-Month Low; U.S. Futures Advance, Oil Gains

May 28, 2010

By Stuart Wallace May 28 (Bloomberg) — Stocks advanced for a third day, led by emerging markets, extending the rebound from a nine-month low. Oil rallied above $75 a barrel and the South Korean won strengthened. The MSCI Emerging Markets Index rose 1.8 percent as of 9:36 a.m. in London, poised for the biggest three-day rally in a year. The MSCI World Index, a gauge of equities in 24 developed nations, added 0.7 percent. Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. Crude increased for a third day. South Korea’s won gained 2.4 percent against the dollar and the euro strengthened 0.5 percent against the dollar. This week’s advances in stocks and commodities pared a rout in May that’s the deepest since October 2008, the month after the collapse of Lehman Brothers Holdings Inc. U.S. consumer spending probably rose in April for a seventh consecutive month as incomes improved, economists said before a Commerce Department report scheduled for later today. “I’m an optimist,” James Bevan , chief investment officer at CCLA Investment Management, said in a Bloomberg Television interview. “The economic fundamentals are rather better than some suspect and that’s certainly coming through in terms of the corporate earnings numbers. Companies are demonstrating better profits than many people had dared anticipate.” The Stoxx Europe 600 Index rose 0.4 percent as Travis Perkins Plc rallied. The owner of Wickes home-improvement stores surged 8.3 percent after offering to buy BSS Group Plc to create the U.K.’s largest plumbing and heating materials chain. BP Declines BP Plc slid 1.9 percent after Europe’s second-largest oil company said the “top kill” procedure to plug a leaking well in the Gulf of Mexico may last another 24 to 48 hours. The MSCI Asia Pacific Index climbed for a third day, surging 1.5 percent. The MSCI emerging-markets index headed for its highest closing level in eight days. South Korea’s Kospi Index advanced 1 percent as foreign investors added to stock holdings for the first time in 10 days and a central bank report showed manufacturers’ confidence stayed near a seven-year high. The nation’s equities and currency tumbled earlier this week amid mounting tension with North Korea over the sinking of one of the South’s warships. The ruble in Russia, the world’s largest energy exporter, strengthened 1.1 percent versus the dollar. The euro rose for a second day against the dollar, strengthening 0.5 percent to $1.2430. It appreciated 0.8 percent compared with the yen, which declined against all 16 of its most-traded counterparts. The U.S. Dollar Index , which tracks the currency against six trading partners, slid 0.2 percent. U.S. Futures Futures on the S&P 500 rose 0.2 percent before reports on U.S. personal spending, business activity and consumer confidence. Spending probably increased in April for a seventh consecutive month as incomes improved, economists said before a report due at 8:30 a.m. in Washington. Other data today may show the Institute for Supply Management-Chicago Inc.’s business barometer, due at 9:45 a.m., fell to 61 from a five-year high of 63.8 in April. At 9:55 a.m., a report from Thomson Reuters/University of Michigan may show its consumer sentiment index climbed to 73.3 this month from 72.2 in April. Crude oil for July delivery gained 1.4 percent to $75.61 a barrel in New York trading. Copper for delivery in three months was 0.1 percent higher at $6,992 a metric ton on the London Metal Exchange. Aluminum and zinc also rose. Gold for immediate delivery added 0.2 percent to $1,214.90 an ounce, rising for a fifth consecutive day. Bonds Rise Government bonds rose, with the yield on the 10-year Treasury falling four basis points to 3.33 percent. The yield on the German bund, Europe’s benchmark government security, also dropped three basis points, to 2.69 percent. The cost of protecting against a default on European corporate bonds fell, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated companies declining 13.1 basis points to 547.1, according to Markit Group Ltd. Contracts tied to Greece’s government debt dropped 15.5 basis points to 670.5, after climbing as high as 941 on May 6 at the height of the country’s debt crisis, CMA DataVision prices show. Credit markets froze this month, with global companies selling the smallest amount of bonds in a decade, according to data compiled by Bloomberg. Borrowers issued $61.1 billion of notes in currencies from dollars to yen, a third of April’s tally and the least since December 2000. The extra yield investors demand to hold the securities instead of benchmark government debt widened 44 basis points to 193, Bank of America Merrill Lynch index data show, the biggest increase since the aftermath of Lehman Brothers Holdings Inc.’s collapse. To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net

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Stocks Extend Rebound From Nine-Month Low; U.S. Futures Advance, Oil Gains

May 28, 2010

By Stuart Wallace May 28 (Bloomberg) — Stocks advanced for a third day, led by emerging markets, extending the rebound from a nine-month low. Oil rallied above $75 a barrel and the South Korean won strengthened. The MSCI Emerging Markets Index rose 1.8 percent as of 9:36 a.m. in London, poised for the biggest three-day rally in a year. The MSCI World Index, a gauge of equities in 24 developed nations, added 0.7 percent. Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. Crude increased for a third day. South Korea’s won gained 2.4 percent against the dollar and the euro strengthened 0.5 percent against the dollar. This week’s advances in stocks and commodities pared a rout in May that’s the deepest since October 2008, the month after the collapse of Lehman Brothers Holdings Inc. U.S. consumer spending probably rose in April for a seventh consecutive month as incomes improved, economists said before a Commerce Department report scheduled for later today. “I’m an optimist,” James Bevan , chief investment officer at CCLA Investment Management, said in a Bloomberg Television interview. “The economic fundamentals are rather better than some suspect and that’s certainly coming through in terms of the corporate earnings numbers. Companies are demonstrating better profits than many people had dared anticipate.” The Stoxx Europe 600 Index rose 0.4 percent as Travis Perkins Plc rallied. The owner of Wickes home-improvement stores surged 8.3 percent after offering to buy BSS Group Plc to create the U.K.’s largest plumbing and heating materials chain. BP Declines BP Plc slid 1.9 percent after Europe’s second-largest oil company said the “top kill” procedure to plug a leaking well in the Gulf of Mexico may last another 24 to 48 hours. The MSCI Asia Pacific Index climbed for a third day, surging 1.5 percent. The MSCI emerging-markets index headed for its highest closing level in eight days. South Korea’s Kospi Index advanced 1 percent as foreign investors added to stock holdings for the first time in 10 days and a central bank report showed manufacturers’ confidence stayed near a seven-year high. The nation’s equities and currency tumbled earlier this week amid mounting tension with North Korea over the sinking of one of the South’s warships. The ruble in Russia, the world’s largest energy exporter, strengthened 1.1 percent versus the dollar. The euro rose for a second day against the dollar, strengthening 0.5 percent to $1.2430. It appreciated 0.8 percent compared with the yen, which declined against all 16 of its most-traded counterparts. The U.S. Dollar Index , which tracks the currency against six trading partners, slid 0.2 percent. U.S. Futures Futures on the S&P 500 rose 0.2 percent before reports on U.S. personal spending, business activity and consumer confidence. Spending probably increased in April for a seventh consecutive month as incomes improved, economists said before a report due at 8:30 a.m. in Washington. Other data today may show the Institute for Supply Management-Chicago Inc.’s business barometer, due at 9:45 a.m., fell to 61 from a five-year high of 63.8 in April. At 9:55 a.m., a report from Thomson Reuters/University of Michigan may show its consumer sentiment index climbed to 73.3 this month from 72.2 in April. Crude oil for July delivery gained 1.4 percent to $75.61 a barrel in New York trading. Copper for delivery in three months was 0.1 percent higher at $6,992 a metric ton on the London Metal Exchange. Aluminum and zinc also rose. Gold for immediate delivery added 0.2 percent to $1,214.90 an ounce, rising for a fifth consecutive day. Bonds Rise Government bonds rose, with the yield on the 10-year Treasury falling four basis points to 3.33 percent. The yield on the German bund, Europe’s benchmark government security, also dropped three basis points, to 2.69 percent. The cost of protecting against a default on European corporate bonds fell, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated companies declining 13.1 basis points to 547.1, according to Markit Group Ltd. Contracts tied to Greece’s government debt dropped 15.5 basis points to 670.5, after climbing as high as 941 on May 6 at the height of the country’s debt crisis, CMA DataVision prices show. Credit markets froze this month, with global companies selling the smallest amount of bonds in a decade, according to data compiled by Bloomberg. Borrowers issued $61.1 billion of notes in currencies from dollars to yen, a third of April’s tally and the least since December 2000. The extra yield investors demand to hold the securities instead of benchmark government debt widened 44 basis points to 193, Bank of America Merrill Lynch index data show, the biggest increase since the aftermath of Lehman Brothers Holdings Inc.’s collapse. To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net

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Stocks Extend Rebound From Nine-Month Low; U.S. Futures Advance, Oil Gains

May 28, 2010

By Stuart Wallace May 28 (Bloomberg) — Stocks advanced for a third day, led by emerging markets, extending the rebound from a nine-month low. Oil rallied above $75 a barrel and the South Korean won strengthened. The MSCI Emerging Markets Index rose 1.8 percent as of 9:36 a.m. in London, poised for the biggest three-day rally in a year. The MSCI World Index, a gauge of equities in 24 developed nations, added 0.7 percent. Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. Crude increased for a third day. South Korea’s won gained 2.4 percent against the dollar and the euro strengthened 0.5 percent against the dollar. This week’s advances in stocks and commodities pared a rout in May that’s the deepest since October 2008, the month after the collapse of Lehman Brothers Holdings Inc. U.S. consumer spending probably rose in April for a seventh consecutive month as incomes improved, economists said before a Commerce Department report scheduled for later today. “I’m an optimist,” James Bevan , chief investment officer at CCLA Investment Management, said in a Bloomberg Television interview. “The economic fundamentals are rather better than some suspect and that’s certainly coming through in terms of the corporate earnings numbers. Companies are demonstrating better profits than many people had dared anticipate.” The Stoxx Europe 600 Index rose 0.4 percent as Travis Perkins Plc rallied. The owner of Wickes home-improvement stores surged 8.3 percent after offering to buy BSS Group Plc to create the U.K.’s largest plumbing and heating materials chain. BP Declines BP Plc slid 1.9 percent after Europe’s second-largest oil company said the “top kill” procedure to plug a leaking well in the Gulf of Mexico may last another 24 to 48 hours. The MSCI Asia Pacific Index climbed for a third day, surging 1.5 percent. The MSCI emerging-markets index headed for its highest closing level in eight days. South Korea’s Kospi Index advanced 1 percent as foreign investors added to stock holdings for the first time in 10 days and a central bank report showed manufacturers’ confidence stayed near a seven-year high. The nation’s equities and currency tumbled earlier this week amid mounting tension with North Korea over the sinking of one of the South’s warships. The ruble in Russia, the world’s largest energy exporter, strengthened 1.1 percent versus the dollar. The euro rose for a second day against the dollar, strengthening 0.5 percent to $1.2430. It appreciated 0.8 percent compared with the yen, which declined against all 16 of its most-traded counterparts. The U.S. Dollar Index , which tracks the currency against six trading partners, slid 0.2 percent. U.S. Futures Futures on the S&P 500 rose 0.2 percent before reports on U.S. personal spending, business activity and consumer confidence. Spending probably increased in April for a seventh consecutive month as incomes improved, economists said before a report due at 8:30 a.m. in Washington. Other data today may show the Institute for Supply Management-Chicago Inc.’s business barometer, due at 9:45 a.m., fell to 61 from a five-year high of 63.8 in April. At 9:55 a.m., a report from Thomson Reuters/University of Michigan may show its consumer sentiment index climbed to 73.3 this month from 72.2 in April. Crude oil for July delivery gained 1.4 percent to $75.61 a barrel in New York trading. Copper for delivery in three months was 0.1 percent higher at $6,992 a metric ton on the London Metal Exchange. Aluminum and zinc also rose. Gold for immediate delivery added 0.2 percent to $1,214.90 an ounce, rising for a fifth consecutive day. Bonds Rise Government bonds rose, with the yield on the 10-year Treasury falling four basis points to 3.33 percent. The yield on the German bund, Europe’s benchmark government security, also dropped three basis points, to 2.69 percent. The cost of protecting against a default on European corporate bonds fell, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated companies declining 13.1 basis points to 547.1, according to Markit Group Ltd. Contracts tied to Greece’s government debt dropped 15.5 basis points to 670.5, after climbing as high as 941 on May 6 at the height of the country’s debt crisis, CMA DataVision prices show. Credit markets froze this month, with global companies selling the smallest amount of bonds in a decade, according to data compiled by Bloomberg. Borrowers issued $61.1 billion of notes in currencies from dollars to yen, a third of April’s tally and the least since December 2000. The extra yield investors demand to hold the securities instead of benchmark government debt widened 44 basis points to 193, Bank of America Merrill Lynch index data show, the biggest increase since the aftermath of Lehman Brothers Holdings Inc.’s collapse. To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net

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Stocks Extend Rebound From Nine-Month Low; U.S. Futures Advance, Oil Gains

May 28, 2010

By Stuart Wallace May 28 (Bloomberg) — Stocks advanced for a third day, led by emerging markets, extending the rebound from a nine-month low. Oil rallied above $75 a barrel and the South Korean won strengthened. The MSCI Emerging Markets Index rose 1.8 percent as of 9:36 a.m. in London, poised for the biggest three-day rally in a year. The MSCI World Index, a gauge of equities in 24 developed nations, added 0.7 percent. Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. Crude increased for a third day. South Korea’s won gained 2.4 percent against the dollar and the euro strengthened 0.5 percent against the dollar. This week’s advances in stocks and commodities pared a rout in May that’s the deepest since October 2008, the month after the collapse of Lehman Brothers Holdings Inc. U.S. consumer spending probably rose in April for a seventh consecutive month as incomes improved, economists said before a Commerce Department report scheduled for later today. “I’m an optimist,” James Bevan , chief investment officer at CCLA Investment Management, said in a Bloomberg Television interview. “The economic fundamentals are rather better than some suspect and that’s certainly coming through in terms of the corporate earnings numbers. Companies are demonstrating better profits than many people had dared anticipate.” The Stoxx Europe 600 Index rose 0.4 percent as Travis Perkins Plc rallied. The owner of Wickes home-improvement stores surged 8.3 percent after offering to buy BSS Group Plc to create the U.K.’s largest plumbing and heating materials chain. BP Declines BP Plc slid 1.9 percent after Europe’s second-largest oil company said the “top kill” procedure to plug a leaking well in the Gulf of Mexico may last another 24 to 48 hours. The MSCI Asia Pacific Index climbed for a third day, surging 1.5 percent. The MSCI emerging-markets index headed for its highest closing level in eight days. South Korea’s Kospi Index advanced 1 percent as foreign investors added to stock holdings for the first time in 10 days and a central bank report showed manufacturers’ confidence stayed near a seven-year high. The nation’s equities and currency tumbled earlier this week amid mounting tension with North Korea over the sinking of one of the South’s warships. The ruble in Russia, the world’s largest energy exporter, strengthened 1.1 percent versus the dollar. The euro rose for a second day against the dollar, strengthening 0.5 percent to $1.2430. It appreciated 0.8 percent compared with the yen, which declined against all 16 of its most-traded counterparts. The U.S. Dollar Index , which tracks the currency against six trading partners, slid 0.2 percent. U.S. Futures Futures on the S&P 500 rose 0.2 percent before reports on U.S. personal spending, business activity and consumer confidence. Spending probably increased in April for a seventh consecutive month as incomes improved, economists said before a report due at 8:30 a.m. in Washington. Other data today may show the Institute for Supply Management-Chicago Inc.’s business barometer, due at 9:45 a.m., fell to 61 from a five-year high of 63.8 in April. At 9:55 a.m., a report from Thomson Reuters/University of Michigan may show its consumer sentiment index climbed to 73.3 this month from 72.2 in April. Crude oil for July delivery gained 1.4 percent to $75.61 a barrel in New York trading. Copper for delivery in three months was 0.1 percent higher at $6,992 a metric ton on the London Metal Exchange. Aluminum and zinc also rose. Gold for immediate delivery added 0.2 percent to $1,214.90 an ounce, rising for a fifth consecutive day. Bonds Rise Government bonds rose, with the yield on the 10-year Treasury falling four basis points to 3.33 percent. The yield on the German bund, Europe’s benchmark government security, also dropped three basis points, to 2.69 percent. The cost of protecting against a default on European corporate bonds fell, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated companies declining 13.1 basis points to 547.1, according to Markit Group Ltd. Contracts tied to Greece’s government debt dropped 15.5 basis points to 670.5, after climbing as high as 941 on May 6 at the height of the country’s debt crisis, CMA DataVision prices show. Credit markets froze this month, with global companies selling the smallest amount of bonds in a decade, according to data compiled by Bloomberg. Borrowers issued $61.1 billion of notes in currencies from dollars to yen, a third of April’s tally and the least since December 2000. The extra yield investors demand to hold the securities instead of benchmark government debt widened 44 basis points to 193, Bank of America Merrill Lynch index data show, the biggest increase since the aftermath of Lehman Brothers Holdings Inc.’s collapse. To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net

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Video: S&P’s Fernandez Rates Spanish Spending Cuts `Positively’

May 28, 2010

May 28 (Bloomberg) — Myriam Fernandez de Heredia, a credit analyst at Standard & Poor’s, talks with Bloomberg’s David Tweed about the Spanish government’s austerity measures and the prospects for Europe’s debt crisis worsening.

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Video: Mutkin Doubts Libor Concerns, Sees `Stacks’ of Liquidity

May 28, 2010

May 28 (Bloomberg) — Laurence Mutkin, head of European rate strategy at Morgan Stanley, talks with Bloomberg’s Andrea Catherwood about the sovereign debt crisis and outlook for money markets. Libor, or the London interbank offered rate, the benchmark for $360 trillion of financial products from mortgages to company borrowing costs, rose for a 12th consecutive day on May 26 and to the highest level since July. The rate was unchanged yesterday.

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Video: Elliott, Bevan Discuss Outlook for European Stocks, Gold

May 28, 2010

May 28 (Bloomberg) — Nicole Elliott, an analyst at Mizuho Corporate Bank Ltd., and James Bevan, chief investment officer at CCLA Investment Management Ltd., talk about the outlook for European stocks and gold.

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Video: Wheaton Sees Gulf of Mexico Drilling Costs Increasing

May 28, 2010

May 28 (Bloomberg) — Christopher Wheaton, a manager of the Allianz RCM Energy Fund, talks with Bloomberg’s Mark Barton about the outlook for off-shore drilling in the Gulf of Mexico following the BP Plc oil spill.

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South Korea May Accept UN Censure for North, Easing China Fears

May 28, 2010
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Sabotage Suspected After Indian Train Collision Kills at Least 35 People

May 28, 2010

By Jay Shankar and Subramaniam Sharma May 28 (Bloomberg) — A goods train rammed into derailed coaches of a passenger express in eastern India, killing at least 35 people in the country’s worst rail disaster in four years, as officials suspected Maoist rebels had sabotaged tracks. The Gyaneshwari Express headed for the financial capital of Mumbai was struck by a cargo train in West Bengal ’s Jhargram district, 155 kilometers (96 miles) southwest of Kolkata, at 1:30 a.m. local time, the state’s Home Secretary Samar Ghosh said in a phone interview. Over 100 injured passengers have been taken to local hospitals, Praveen Kumar, a local deputy inspector general of police, said. “It is a case of sabotage,” Vivek Sahai, a member of the Railway Board, told reporters in New Delhi. The impact of the goods train caused most of the fatalities, he said. Police at the scene of the accident blamed Maoist guerrillas for the derailment, Railway Minister Mamata Banerjee told reporters. The leftwing rebels operate in 11 of India’s 28 states and have killed more than 7,500 people since 1998. They have stepped up attacks in recent weeks, blowing up a passenger bus in mineral-rich Chhattisgarh state earlier this month, killing 31 police personnel and civilians. Initially inspired by Maoist ideology, the guerrillas have pressed a campaign of violence against the government, police and landowners in a class war that seeks to install communist rule. Tracks ‘Cut’ Federal Home Secretary G.K. Pillai said in a phone interview it was too early to say what caused the accident. “We don’t want to blame the Maoists till we have definite evidence,” he said. “There is a cut on the railway track and several compartments were derailed. At least four to five of them are badly damaged,” Ghosh said, adding many passengers are still trapped inside the compartments. The crash is the worst in India since 2006, according to the India Today magazine, when about 40 people died in West Bengal. Press Trust of India said that as many as 65 people may have been killed today, reports that could not be immediately confirmed. Indian Prime Minister Manmohan Singh , who has described the Maoists as the single biggest challenge to the country’s internal security, said he was grieved to learn about the crash, according to an emailed statement from his office. Asia’s Oldest Network India’s 63,000-kilometer railway network, Asia’s oldest, is frequently hit by fatal accidents. At least 10 people were killed after passenger trains collided in north India in dense fog in January. More than 20 people died in a similar accident in October. The rail network carries about 15 million people each day on 11,000 passenger trains, and 1.4 million tons of freight. “The death toll may rise. Most of the injured have been evacuated by road or helicopter” to nearby Kharagpur town, Pillai said of today’s crash. Television channel CNN-IBN showed police officers carrying the injured from the wreckage of the passenger train. India banned the Maoists or Naxalites and more than a dozen “front organizations” in June last year. The radical movement takes its name from a 1967 peasant uprising in a village called Naxalbari in West Bengal. Banerjee announced compensation of 500,000 rupees ($10,900) for the families of those killed in today’s collision, and 100,000 rupees for the injured. To contact the reporter on this story: Ruth David in Mumbai at rdavid9@bloomberg.net

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BP Resumes `Top Kill’ Work to Stop Gulf Oil Spill Bigger Than Exxon Valdez

May 28, 2010

By Jessica Resnick-Ault and Jim Polson May 28 (Bloomberg) — BP Plc resumed pumping thousands of barrels of mud into a damaged oil well in a bid to halt a Gulf of Mexico oil spill that is bigger than the Exxon Valdez disaster and may be the largest in U.S. history. The attempt, known as a “top kill,” restarted at 7 p.m. New York time yesterday, U.S. Coast Guard Chief Bob Laura said by telephone from the spill Joint Information Center in Robert, Louisiana. The effort, begun May 26, was suspended the same day at 11 p.m. for checks and to make some changes to the procedure. “What we do believe we’ve done is successfully pump some drilling mud into the well bore,” Doug Suttles , BP’s chief operating officer for exploration and production, said yesterday at a press conference in Robert. BP will keep pumping the mud for another 24 to 48 hours, he said. “We will continue the efforts as long as there’s a possibility of success.” A successful top-kill would bring a temporary end to a leak that has poured an estimated 23 million gallons of oil into ocean and soiled 100 miles (161 kilometers) of coast. The slick stemming from a fatal April 20 drilling rig explosion threatens the Gulf fishing and tourism industries and has so far cost BP $850 million. “It will be Friday night or Saturday at the earliest before we know definitively that the well has been killed,” Robert MacKenzie , a Houston-based analyst for FBR Capital Markets, wrote yesterday in a note to clients. Exxon Valdez The well has been leaking oil at an estimated rate of 12,000 to 19,000 barrels a day, Marcia McNutt, head of a U.S. government panel studying the flow, said yesterday. At the midpoint of that rate, the well has exceeded the 262,000 barrels spilled by the Exxon Valdez in 1989 and the U.S. record 300,000-barrel spill by a tanker off the Oregon coast in 1968, according to statistics from the American Petroleum Institute . The company will inject material originally intended for another well-blocking solution known as a “junk shot.” Adding the items to the mud may help BP to seal leaks so that enough pressure can be exerted on the column of oil to block the flow. Some of items are fibrous and small, and others are larger rubber balls, Suttles said. The first phase of the top kill effort used less than 15,000 barrels of drilling mud to try to fill the well, Suttles said. The company had 50,000 barrels available for use and has made sure there are additional supplies on hand for when pumping resumes, he said. ‘Arm Wrestle’ The top kill process uses drilling fluid to “arm wrestle” the gusher of oil and natural gas back into the well, said Robert Dudley , managing director for the London-based company. The procedure will serve as a temporary block on the damaged well until another well can be drilled and used to permanently plug it with cement. BP rose 28.8 pence, or 5.9 percent, to 520.8 pence yesterday in London trading. Based on the midpoint of the best estimates released by the Flow Rate Technical Group, the well may have leaked about 527,000 barrels from the day the rig sank, April 22, through May 26, more than double the size of the Exxon Valdez spill in Alaska. The amount of oil being spilled will help determine BP’s liability for the leak. Live Video Feed A live video feed provided by BP showed brown fluid flowing from the site. The feed alone cannot indicate the success of the effort to block the well, Suttles said. Ultimately, the effort will be considered successful when mud has fully blocked oil from leaking and the well has been capped with concrete. The well began leaking after an April 20 explosion and fire on the Deepwater Horizon drilling rig, which resulted in the deaths of 11 workers. BP leased the rig from Geneva-based Transocean Ltd. , the largest deep-water driller. Transocean rose as much as 9.1 percent yesterday. The shares gained $1.13, or 1.9 percent, to $59.71 at 4:01 p.m. in New York Stock Exchange composite trading. Halliburton Co., which provided services on the rig, rose $1.11, or 4.3 percent, to $26.99. Cameron International Corp., which provided equipment for the rig, rose $2, or 5.5 percent, to $38.08. Anadarko Petroleum Corp., which owns a 25 percent stake in the well, rose $2.23, or 4.2 percent, to $55.57. Congress Hearings An underwater oil plume from the spill may have spread 22 miles northeast toward Mobile, Alabama, researchers from the University of South Florida found in a preliminary report. Tests conducted aboard the school’s Weatherbird II vessel showed the highest concentrations of “dissolved hydrocarbons” were 400 meters (1,312 feet) underwater. Congress has scheduled at least 20 hearings on the Deepwater Horizon and offshore drilling since the rig exploded, and the Minerals Management Service and Coast Guard held another day of hearings in Louisiana on the reasons for the accident yesterday. President Barack Obama yesterday extended by six months a moratorium on new deep-water drilling permits that began after oil started to spill from BP’s well. The president also canceled a proposal to drill for oil off the coast of Virginia and planned drilling by Royal Dutch Shell Plc of exploratory wells in the Arctic off Alaska. The head of the Minerals Management Service, the federal agency that oversees offshore drilling, resigned yesterday, according to Interior Secretary Ken Salazar . Cost to BP The spill has so far cost BP a total of $850 million, or about $23 million a day, Suttles said yesterday. Average daily profit last year was $45 million a day, according to data compiled by Bloomberg . The accident “threatens to be the worst oil spill disaster in history,” BP investor Southeastern Pennsylvania Transportation Authority claimed in a Delaware Chancery Court lawsuit filed against BP directors on May 21 in Wilmington. Directors violated their duties to the company, causing “enormous economic harm for failure to act in the interests of BP and its shareholders” and exposing the company to liabilities in the billions of dollars, Septa lawyers contend. The lawsuit lists potential damage claims of about $2.5 billion to the Gulf fishing industry; $3 billion to tourism; $700 million in remediation efforts so far; $6 million a day in continuing costs and “incalculable damages to BP’s reputation.” To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

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Credit Suisse, UBS, Barclays May Provide Refuge From Europe’s Debt Storm

May 28, 2010

By Elena Logutenkova and Aaron Kirchfeld May 28 (Bloomberg) — Investment banks, shunned by investors during the last credit crisis, may be best placed among Europe’s financial firms to weather the region’s sovereign debt woes. Credit Suisse Group AG and UBS AG of Zurich, along with London-based Barclays Plc, are among banks preferred by analysts at Morgan Stanley, JPMorgan Chase & Co., Sanford C. Bernstein and Keefe Bruyette & Woods Ltd. The three banks, based outside the euro region, are likely to face less risk from the sovereign debt and sputtering economies of southern Europe than commercial banking rivals, while benefiting from currency and debt market swings. And, following the last financial crisis, they’ve been forced to build up capital and cash buffers and scale back risk, said Kian Abouhossein at JPMorgan. “Investment banks should be doing well in the current environment,” said London-based Abouhossein, who has an “overweight” rating on UBS and Credit Suisse. “Sovereign risk positions are well managed at the investment banks. There is more bond portfolio exposure within commercial banks.” Investors have battered the shares of European banks, driving the 52-company Bloomberg Europe Banks and Financial Services Index down 13 percent since Standard & Poor’s cut its rating on Greek debt to junk and lowered Portugal’s rating on April 27. The European Union’s $1 trillion pledge to prop up Greece and other debt-ridden states failed to dispel doubts about the region’s finances. The euro fell to a four-year low on May 17. Higher Risk Banks in Greece, Portugal and Spain are perceived as higher-risk investments as efforts to cut budget deficits threaten to choke off an economic recovery. That may lead to a slowdown in lending, higher delinquencies and an increase in loan provisions, analysts said. Greece’s largest banks reported a slump in first-quarter profit this week after loan losses jumped. The cost of insuring against default by European banks has risen. Credit default swaps on UBS, Credit Suisse, Barclays and Frankfurt-based Deutsche Bank AG rose an average of 84 basis points since the beginning of the year. By comparison, contracts on Banco Espirito Santo SA, Portugal’s biggest bank by market value, rose 395 basis points; swaps on Alpha Bank, Greece’s No. 3 lender, advanced 334 basis points; and contracts on Spain’s Banco Bilbao Vizcaya Argentaria SA jumped by 140 basis points, according to CMA DataVision. A basis point is a hundredth of a percentage point. Tapping Global Growth “If a consequence of current volatility is more onerous fiscal cutbacks that dampen economic growth, then it would play to investment banks versus commercial banks,” said Matthew Clark , an analyst at KBW in London. “If your business is globally diversified and flexible, it means you’re better able to tap into global growth, be it in Asia or the U.S., than if you lend to indebted, saturated markets.” Economic stagnation may keep interest rates lower for longer, leading to shrinking profitability at banks that focus on lending to private and corporate clients. Low rates may also drive more money into securities markets, helping investment banks, Morgan Stanley analysts led by Huw van Steenis said in a note this month. To be sure, a credit crunch like the one that followed the bankruptcy of Lehman Brothers Holdings Inc. in September 2008 would leave no banks unscathed, the analysts said. The securities in question this time are bonds sold by EU governments, rather than the debt backed by U.S. subprime mortgages that led to $57 billion of writedowns at UBS during the last crisis, the worst losses for any bank in Europe. Funding Tremors Banks are feeling tremors in the funding market again. The rate they charge each other for three-month loans in dollars rose this week to 0.538 percent, the highest level since July 6, though still a fraction of the 4.82 percent reached in October 2008. Spanish banks increased longer-term borrowing from the European Central Bank last month to the most in 1 1/2 years, according to data compiled by the Bank of Spain. U.S. fund managers are trimming their holdings of commercial paper issued by European banks, driving up rates and forcing companies to borrow for shorter terms, according to Federal Reserve data. BBVA, Spain’s second-biggest bank, has been unable to renew about $1 billion of commercial paper this month, the Wall Street Journal reported May 26. A BBVA spokesman, who declined to be identified in line with company policy, wouldn’t comment. The Swiss banks, in particular, may be better prepared for a crisis this time after the regulator tightened capital and liquidity requirements and the companies put an increased emphasis on earnings brought by client business, rather than from trading for their own account, analysts said. Higher Capital Ratios UBS, Credit Suisse and Barclays rank in the top five among a group of 50 European banks in the increase in their Tier 1 capital ratios since the end of 2007, data compiled by Bloomberg show. “There’s certainly been more change of business model at investment banks,” said Simon Maughan , an analyst at MF Global in London. “Most of the European investment banks have less inventory than previously. They’ve adapted to the new world order: more client flow, less position taking.” Europe’s banks had $433.56 billion at risk in Greece and Portugal at the end of 2009, according to figures from the Bank for International Settlements in Basel, Switzerland. That compares with more than $530 billion in losses and writedowns the region’s financial firms suffered in the credit crisis. Taking Cover Credit Suisse and UBS didn’t have outstanding cross-border debt from Greece or Portugal in excess of 0.75 percent of total assets at the end of 2009, according to company filings. Deutsche Bank said yesterday it had about 500 million euros ($619 million) in Greek sovereign bonds and loans and “negative” risk in Portugal. Barclays didn’t have foreign holdings to any European country in excess of 1 percent of assets, according to its annual filing. Investment banking shares haven’t done much better than the bank index in the past month: UBS fell 11 percent, Credit Suisse 13 percent and Barclays 17 percent. By contrast, Italy’s Unione di Banche Italiane ScpA and Spain’s Banco Popular Espanol SA each dropped 27 percent on concern the Greek debt crisis will spread. “In this environment we doubt that any banking stock has potential to outperform the market,” Bernstein’s Dirk Hoffmann- Becking said in a note to clients on May 26. “That said, we believe investors are best served to take temporary cover in the investment banks.” To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

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Daimler Raises Mercedes-Benz Profit Forecast for Second Time in Six Weeks

May 28, 2010

By Chad Thomas May 28 (Bloomberg) — Daimler AG , the world’s second- largest luxury carmaker, said the Mercedes-Benz unit’s operating profit in the current quarter will rise as demand increases. Mercedes-Benz Cars’ earnings before interest and taxes in the second quarter will exceed the 806 million euros ($996 million) reported for the first quarter, Chief Executive Dieter Zetsche said in a statement today. Full-year Ebit will be at the “upper end” of the carmaker’s forecast of 2.5 billion euros to 3 billion euros. Daimler is seeking to close the gap with luxury leader Bayerische Motoren Werke AG and fend off Volkswagen AG’s Audi. The Mercedes-Benz maker aims to gain market share this year by introducing an extended version of its full-size E-Class sedan, its first vehicle targeted exclusively for the fast-growing Chinese market. Deliveries of Mercedes vehicles in China more than doubled in the first quarter. Stuttgart, Germany-based Daimler will reach its goal of 10 percent return on sales at Mercedes-Benz in the second half of 2012 and maintain that level for the full-year as of 2013 as the global economy recovers, the carmaker said today. “Mercedes-Benz Cars’ second-quarter production output of well over 300,000 vehicles will be close to the volumes achieved before the start of the financial and economic crisis,” Daimler said. The division has “significant advantages” including a better mix of products and pricing that may lead to a higher return on sales in the second quarter than in the first as well, the carmaker said. To contact the reporter on this story: Chad Thomas in Helsinki at Cthomas16@bloomberg.net .

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RBS Dollar Borrowing Costs Hover 28% Above Rivals as Libor Rates Escalate

May 28, 2010

By Andrew MacAskill and Jon Menon May 28 (Bloomberg) — Royal Bank of Scotland Group Plc , the U.K.’s largest government-owned bank, faces borrowing costs in dollars 25 percent higher than some rivals as Europe’s debt crisis stains interbank lending. The difference among the highest interest rates, paid by RBS, and the lowest, paid by Deutsche Bank AG, for three-month dollar-denominated loans was widest this year on May 26, according to data compiled by the British Bankers’ Association in a daily survey of 16 major banks. Higher borrowing costs for European banks may lead to increased rates for consumers and businesses. “We have had a number of stories worsening sentiment, the biggest one being the sovereign crisis, which doesn’t strengthen trust between European counterparts,” said Christoph Rieger , Frankfurt-based co-head of fixed-income strategy at Commerzbank AG. “These news-driven events are making it more difficult for euro-zone banks to tap U.S. dollar funding.” The global financial crisis was triggered by rising borrowing costs for banks in 2007 when the collapse of U.S. subprime mortgages caused credit markets to freeze. That prompted governments in the European Union to pledge more than 5.3 trillion euros ($6.5 trillion) to rescue lenders, raising budget deficits and contributing to the sovereign-debt crisis. Libor, or the London interbank offered rate, the benchmark for $360 trillion of financial products from mortgages to company borrowing costs, rose for a 12th consecutive day on May 26 and to the highest level since July. The rate was unchanged yesterday. ‘Credit Tiering’ West LB AG, Bank of Tokyo-Mitsubishi UFJ Ltd., Norinchukin Bank and Barclays Plc were among the banks that quoted rates above yesterday’s dollar Libor. Deutsche Bank , Rabobank Nederland NV and JPMorgan Chase & Co. posted the lowest rates. Michael Strachan at RBS declined to comment, as did Walter Hillebrand-Droste , a spokesman for West LB. “It is an illustration of credit tiering in the market,” said John Ewan , a London-based director of the BBA. “This shows the market’s estimation of how risky a bank is. We know that there is stress in the markets, and some banks can attract funding at lower rates than other banks.” RBS had the highest dollar Libor rate yesterday at 0.60 percent. The Edinburgh-based bank, required more than 45.5 billion pounds ($65 billion) in government support during the financial crisis in the world’s biggest banking bailout. WestLB, the German lender bailed out during the financial crisis, had the second-highest borrowing rate at 0.595 percent. London Survey Deutsche Bank gave the lowest rate at 0.48 percent, followed by Rabobank at 0.49 percent and JPMorgan at 0.50 percent. Since the start of the year the average paid by the banks to borrow is 0.35 percent. Every morning, the London-based BBA surveys members of the trade group on how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros and yen. It then calculates averages, throwing out the four highest and lowest quotes, and publishes them after 11:30 a.m. in London. Since the start of this year, West LB had the highest average dollar funding costs at 0.36 percent, followed by Bank of Tokyo-Mitsubishi and Norinchukin at 0.35 percent. Deutsche Bank, JPMorgan and HSBC had the lowest funding costs at 0.27 percent. Dollar Demand Rising RBS has among the lowest borrowing costs in sterling and euros, where rates aren’t climbing as much as in dollars, according to BBA data. Demand for dollars is increasing among banks and investors as uneasiness over European economies and the euro has bolstered the demand for the haven of the U.S. currency. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, has been unable to renew about $1 billion of short-term funding, the Wall Street Journal reported May 26. The bank still has substantial European-based funding and deposits and about $9 billion in U.S. commercial paper, the newspaper said. A spokesman for BBVA in Madrid, who asked not to be identified because of bank policy, declined to comment. Libor has more than doubled since the start of this year, and analysts are predicting it may rise further. Citigroup Global Markets Inc. strategist Neela Gollapudi in New York said that the rate may reach 1.5 percent “over the next several months” because increased regulation may increase banks’ uncertainty about how they will be able to fund themselves. Below 2008 Levels Banks’ borrowing rates are still well below the levels of 2007 and 2008 when interbank lending froze, causing governments around the world to spend trillions rescuing lenders. Libor rose to 4.82 percent on Oct. 10 in the weeks after the collapse of Lehman Brothers Holdings Inc. in 2008. The spread between what different banks are paying to borrow in dollars, currently about 0.13 percent, is also below the levels reached in 2008 when it soared to 1 percent, according to BBA data. Stock markets tumbled and investors fled to the relative safety of gold and government bonds earlier this week as concern grew about the health of European banks. The Bank of Spain seized the CajaSur bank on May 22, and four Spanish savings banks plan to combine as regulators push ailing lenders to merge with stronger partners. RBS, 83 percent government-owned, and Lloyds Banking Group Plc , 41 percent owned by taxpayers, have fallen by more than 15 percent in the last month amid funding concerns. RBS and Lloyds need to start repaying about 230 billion pounds to the U.K. government at the start of next year as they begin to withdraw the cheap loans used to prop up lenders at the peak of the crisis. Lending at Risk Rising borrowing costs for banks may make it harder for RBS and Lloyds to meet the government-agreed lending targets, a priority of the new Conservative-Liberal Democrat coalition. Higher bank borrowing costs may also push up the rates on mortgages, credit cards and corporate loans. “Higher rate of funding implies a higher rate being passed on to consumers or a tighter supply of credit,” said Chris Scicluna , an economist at Daiwa Securities SMBC Europe Ltd. in London. “Both things are not really what the doctor ordered for the U.K. economy right now.” To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.net ; Jon Menon in London at jmenon1@bloomberg.net

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Shell Agrees to Purchase Subsidiaries of East Resources for $4.7 Billion

May 28, 2010

By Fred Pals May 28 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil company, agreed to buy subsidiaries which own substantially all of the businesses of East Resources Inc. for $4.7 billion.

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Asian Stocks Rise for a Third Day After U.S. Shares Rally; Euro Declines

May 28, 2010

By Nicolas Johnson and Masaki Kondo May 28 (Bloomberg) — Asian stocks rose for a third day, extending a rally that drove the U.S. benchmark equity index to its biggest gain in almost three weeks. The euro weakened on concern Europe’s fiscal crisis will lead to stricter regulations. The MSCI Asia Pacific Index climbed 1.4 percent as of 4:13 p.m. in Tokyo, heading for its longest streak of gains since April 7. Futures on the U.S. Standard & Poor’s 500 Index fell 0.2 percent after the gauge’s 3.3 percent surge yesterday. The Stoxx Europe 600 Index increased 0.4 percent. The euro weakened against 13 of its 16 most-traded counterparts. This week’s advances in stocks and crude oil pared a rout in May that’s the deepest since October 2008, the month after the collapse of Lehman Brothers Holdings Inc. Equities, the euro and commodities climbed yesterday after China affirmed its commitment to investing in Europe, easing concern that the region’s fiscal crisis will stall a global economic recovery. “The market has priced in all the bad news for now,” said Tokyo-based strategist Ayako Sera at Sumitomo Trust & Banking Co., which manages $307 billion. “Stocks are undervalued, assuming Europe’s problems won’t spill over and cripple the global economy. More than 80 of the 93 benchmark equity indexes worldwide tracked by Bloomberg have fallen in May on concern European countries in addition to Greece will struggle to repay debt. The MSCI World Index had its biggest one-day plunge this month on May 20 after Germany banned some bearish investments. Treasury Secretary Timothy F. Geithner said yesterday the U.S. and Europe are in “broad agreement” on the need for tighter market regulation. Stocks, Currencies, CDS Japan’s Nikkei 225 Stock Average gained 1.3 percent today. Hong Kong’s Hang Seng Index soared 2.4 percent, the most among major equity benchmarks in the Asia-Pacific region. Markets in Indonesia, Malaysia, Singapore and Thailand are closed today for a holiday. U.S. markets will be shut on May 31. The euro dropped against the dollar, curbing yesterday’s 1.5 percent rally, and retreated against its major counterparts after Japanese Finance Minister Naoto Kan said a Group of 20 summit next week may address the effect of the European crisis on currencies and financial regulations. “As the crisis spreads from public sectors to private ones, markets want policy makers to solve the problem rather than adding some relief,” said Kuniyuki Hirai , manager of foreign- exchange trading at Bank of Tokyo-Mitsubishi UFJ Ltd. “The euro will continue to be under selling pressure.” Won, Oil Advance South Korea’s won recorded its biggest two-day gain in more than a year, rising 2.4 percent to 1,194.60 against the dollar as of the 3 p.m. close in Seoul. The cost of insuring Asia- Pacific bonds from non-payment dropped, according to traders of credit-default swaps. Canon Inc., a camera maker that counts Europe as its biggest market, climbed 1.6 percent in Tokyo. In Hong Kong, PetroChina Co., the country’s biggest oil producer, jumped 4.5 percent. Energy companies led gains among the MSCI Asia Pacific Index’s 10 industry groups. Oil rose for a third day, poised for its first weekly advance in four weeks, after the U.S., the world’s largest energy user, reported yesterday that its economy grew for a third consecutive quarter and jobless claims fell. Crude oil for July delivery gained 8 cents, or 0.2 percent, to $74.66 a barrel in electronic trading on the New York Mercantile Exchange. The dollar rose to a one-week high against the yen before a report forecast to show U.S. consumer spending and incomes rose, adding to signs the nation’s economic recovery remains on track. Europe’s currency dropped to $1.2349 in Tokyo from $1.2362 in New York yesterday. The euro was at 112.79 yen from 112.55, having declined 0.3 percent this week. “Markets are thinking they may have overpriced risks related to Europe,” said Sebastien Barbe , head of emerging- market research for Credit Agricole CIB in Hong Kong. If concern eases that Europe will derail the recovery, “then there’s no reason to sell stocks and currencies in Asia. There is scope now to come back to more supportive levels,” he said. To contact the reporters on this story: Nicolas Johnson in Tokyo at nicojohnson@bloomberg.net .

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Prudential Says It’s Holding Talks to Renegotiate Terms of AIA Acquisition

May 28, 2010

By Kevin Crowley May 28 (Bloomberg) — Prudential Plc Chief Executive Officer Tidjane Thiam was handed the chance to make a $35.5 billion bid for insurer AIA Group Ltd. after his firm’s share price almost tripled. The biggest decline in equity markets since the financial crisis may derail his plans. Falling investor confidence sparked by Europe’s sovereign debt crisis hampered corporate fundraisings in the past two months as Thiam, 47, asks investors for $21 billion, the biggest rights offer for an acquisition on record. Thiam was in New York yesterday to make his case in person to American International Group Inc. executives that the price for AIA should be cut, said a person with knowledge of the situation. The company confirmed in a statement today that talks with AIG are continuing. “It’s probably the least ideal market to raise capital,” said James Buckley , a London-based fund manager at Baring Asset Management Ltd. , who helps oversee $44 billion, including Prudential stock. “The market is not completely closed for small rights offers, but for major deals like Prudential, it’s inevitably tough.” Thiam said when he announced the offer in March that Prudential had “earned the right” to buy AIA after the stock jumped 191 percent to 602.5 pence in 12 months. The MSCI World Index plunged about 11 percent in the last six weeks, fueling shareholder criticism that Prudential is overpaying for AIA. BlackRock Inc. and Fidelity Investments are among major Prudential shareholders that have voiced concern the deal is too expensive, said the person, who declined to be identified because the discussions are private. Some shareholders are demanding a reduction to as low as $30 billion, a price AIG’s board is unlikely to approve, the person said. ‘Live Up to It’ “We have a signed agreement with Prudential, and we expect them to use their best efforts to live up to it,” said Mark Herr , a spokesman for New York-based AIG, in a statement late yesterday. Speculation the deal would collapse was “unfounded,” Prudential spokesman Ed Brewster said. The current talks between Prudential and AIG “may or may not lead to a change in the terms of the combination,” the insurer said today. “The acquisition of AIA by Prudential represents a compelling combination that can deliver very attractive long- term returns to our shareholders,” Brewster said. Investors owning as much as 20 percent of Prudential stock plan to vote down the takeover at the U.K. insurer’s annual general meeting on June 7, Neptune Investment Management Ltd. , a London-based shareholder, said this week. Thiam needs 75 percent of investors to support the rights offer for the deal to succeed. The Public Offering Option The U.S. Treasury Department, which helped fund the $182.3 billion bailout of AIG, has not asked the company to find a compromise on the AIA deal, spokesman Andrew Williams said in an e-mail. He commented after the Daily Telegraph reported that Treasury had encouraged the insurer to negotiate to preserve the takeover of AIA. AIG, which is selling assets to repay a U.S. bailout, had been planning a public offering of AIA until announcing the Prudential deal in March. AIG could return to the public- offering option if Prudential shareholders reject the deal, Jim Millstein , the Treasury’s chief restructuring officer, said this week in Washington. “It would certainly be a mistake to not be willing to renegotiate,” said Angelo Graci , managing director at Chapdelaine Credit Partners in New York. “There are meaningful risks to going back and pursuing an IPO; it would take longer, and the valuation would have a significant amount of uncertainty.” Largest Shareholders Prudential plans to fund the AIA purchase through a $21 billion rights offer, including fees to banks, $10.5 billion of new shares and other securities and by selling debt. The offer is the biggest in U.K. corporate history. Prudential has a market value of about 13.9 billion pounds ($20.2 billion). Capital Research & Management Co., Prudential’s biggest shareholder, would have to pay about 1.89 billion pounds to take up its rights in full, data compiled by Bloomberg show. The next three biggest holders, Blackrock, Legal & General Group Plc and Norges Bank, would pay about 1.96 billion pounds among them if they decide to buy their full allocation of shares. Not all Prudential’s directors plan to take up their rights in full, Chairman Harvey McGrath said this week. Michael McLintock , CEO of Prudential’s fund management unit, would have to pay about 3.4 million pounds to fully back the transaction. “In uncertain times investors aren’t as willing to take as much risk, and it makes it harder to raise funds for expansion,” said Peter Braendle , who helps oversee about $51 billion at Swisscanto Asset Management AG in Zurich, and hasn’t decided whether he’ll back the rights offer. “Investors prefer to have a bit more cash.” Fundraisings Postponed At least 19 companies have postponed or withdrawn $5 billion in U.S. debt sales since April 13, data compiled by Bloomberg show. Investment banking fees from acquisition advice, share and bond sales in western Europe dropped 17 percent in the first four months of 2010 compared with the previous year, New York-based research firm Freeman & Co. said. Standard Chartered Plc , the London-based bank that makes most of its profit in Asia, received bids yesterday for about 11 percent of the shares available in an initial public offering in India with one day to go. “It’s not easy to get people to part with their money when they aren’t sure about the prospects for equity markets and are more focused on preserving their wealth,” said Mike Lenhoff , chief strategist at Brewin Dolphin Holdings Plc in London, which has 22 billion pounds under management. “It’s an extremely difficult background that presents major obstacles to people trying to sort out some corporate strategies.” Shares Gain Prudential, which yesterday posted its steepest increase since August, rose as much as 2.3 percent in London and was trading up 1.2 percent at 554 pence as of 8:05 a.m. local time. The insurer’s share price was 602.5 pence on Feb. 26, the last trading day before the deal was announced. Prudential shares were suspended in Hong Kong earlier today before the company’s statement. The combined Prudential-AIA would be the largest life insurer in Hong Kong, as well as in Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam. Paying $35.5 billion for AIA will create an entity worth $60 billion by 2013, Thiam said this month. “The deal raises the question why the company is trying to pursue it if a substantial number of shareholders are opposing it,” said Tom Kirchmaier , a fellow at the London School of Economics. “For me the concerns in the debt market just mirror those in the equity market, and the market might just kill a deal which it considers a bad deal.” To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

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Cracking Open Ken Starr, Hollywood’s Mini-Madoff

May 27, 2010

Who is Ken Starr? Until Thursday, when the New York money manager grabbed headlines as the alleged center of a $30 million Ponzi scheme, Starr operated in the shadows, despite an A-list client list that included Martin Scorsese, Uma Thurman and Ron Howard.

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Robert Reich: How Conservatives Made the Case for Increased Regulations

May 27, 2010

According to a new CBS News poll 70 percent of Americans disapprove of how BP has handled the oil gush, compared with 45 percent who disapprove of how Obama has handled it. This could change in the days or weeks ahead if the spill continues to worsen and the White House looks and acts powerless. The poll also points out a danger for Obama: Only 35 percent approve of his words and deeds so far during the crisis. He seems too willing to defer to BP executives, even as Bad Petroleum Ltd. tries to shift blame to Transocean Ltd., the rig operator, which is trying to put blame on Halliburton, which made the cement casings. But it’s not just the oil gush. Most Americans continue to be livid at Wall Street executives and traders — for which they blame an economic crisis that’s cost many their jobs, savings, and homes — a crisis that’s still costing taxpayers a bundle even as the bankers are back to collecting huge compensation packages. Yet the President continues to consult and socialize with many of them. Inexplicably, the White House won’t go along with proposals by several Democratic senators to cap the size of the biggest banks (the only way to ensure they’ll never be too big to fail and their political power is contained), to resurrect the Glass-Steagall Act (except in its weaker “Volcker rule” form), or to force the biggest banks to do their derivative trading without the artificial support of tax-payer insured commercial deposits. Most people are also furious that executives at Massey Energy failed to use mandated safety equipment and procedures that might have saved the lives of 29 miners. Where were the regulators? What does the Administration plan to do to the company or its executives? Most Americans upset that the top guns at Anthem, WellPoint, and other health insurers are still hiking insurance rates. Why are these health insurers still immune from the antitrust laws? How can the Administration not blow the whistle on their current attempts blunt regulations that would cap their premiums? Many are angry that the executives of credit card companies still charging outlandish rates on overcharges that are still hard to compute. What happened to the new rules that were supposed to stop this? Most Americans who know about it are bothered that the managers of hedge funds and private-equity funds (the 25 richest of whom took $1 billion each last year) are taxed at only 15 percent because of a loophole in the tax laws that the Senate continues to protect. You get my drift. Yet the President is treating these corporate and financial executives the way he treats Senate Republicans. At most, he respectfully disagrees. Respectful disagreement is virtuous in a democratic society, but so is appropriate indignation. Indignation signals to the public that social responsibilities have been breached, and thereby lends credence and authority to all those who are working toward them. Franklin D. Roosevelt had no hesitancy blaming the “economic royalists” — the rich bankers and executives who stood in the way of the New Deal. Moreover, without indignation, the President opens himself up to libertarian critics such as Rand Paul, who oppose almost all government regulation (“What I don’t like from the president’s administration is this sort of, ‘I’ll put my boot heel on the throat of BP”), as well as right-wing opportunists who claim the President is pulling his punches because he receives campaign donations from oil companies. Here’s Sarah Palin, of all people: “The oil companies who have so supported President Obama in his campaign and are supportive of him now — I don’t know why the question isn’t asked by the mainstream media and by others if there’s any connection with the contributions made to President Obama and his administration and the support by the oil companies to the administration [and] President Obama taking so doggone long to get in there, to dive in there, and grasp the complexity and the potential tragedy that we are seeing here in the Gulf of Mexico.” It’s also important for the President to connect the dots — providing Americans a clear narrative for why government is so critically important. Corporations are organized to maximize profits, not to achieve public goals such as environmental protection, financial trust, safety, and so on. Since Ronald Reagan first opined that government was the problem rather than the solution, right-wing Republicans have blasted all forms of regulation. Now we see the consequences of years of regulatory neglect. The President has an opportunity now to express appropriate indignation and to assert the importance of reasonable regulation. He should waste no time doing so. This post originally appeared at RobertReich.org

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Viacom Promotes Finance Head Dooley to New Post of Chief Operating Officer

May 27, 2010
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Japan Curbs Transfers of Cash to North Korea, Authorizes Searches of Ships

May 27, 2010

By Takashi Hirokawa May 28 (Bloomberg) — Japan will tighten controls on sending money to North Korea, requiring people to notify the finance ministry on remittances that exceed 3 million yen ($32,800). The reporting cap will be lowered from the current 10 million yen, Chief Cabinet Secretary Hirofumi Hirano said in Tokyo today. The change is a response to recent North Korean aggression.

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Kan Says G-20 May Discuss Impact of Europe Crisis on Currencies Next Week

May 27, 2010

By Toru Fujioka May 28 (Bloomberg) — Group of 20 finance ministers and central bankers may discuss the effect of the European sovereign debt crisis on currencies at next week’s meeting in South Korea, Japanese Finance Minister Naoto Kan said. “Some nations may have an interest in discussing currencies,” Kan said at a news conference in Tokyo today. “I think discussion of the impact of the European situation on currencies will be on the main agenda,” as well as financial regulation and developments in the global economy, he said. Japan’s currency has been rising because of Europe’s fiscal woes and concern about financial regulation in the region, Vice Finance Minister Naoki Minezaki said yesterday. The yen has gained this month against all 16 major currencies tracked by Bloomberg News, threatening the competitiveness of the exporters that have led the nation’s economic recovery. The yen climbed 9.9 percent versus the euro this month and 2.9 percent against the dollar. It traded at 91.22 per dollar and 112.38 against the euro at 10:03 a.m. in Tokyo. A yen at 90 to the dollar is “tough” for Japanese exporters, Hiromasa Yonekura , head of the nation’s biggest business lobby, told reporters in Tokyo yesterday. G-20 finance officials are scheduled to meet on June 4-5 in Busan, South Korea. The group consists of the European Union, U.S., Japan, China, India, the U.K., Australia, South Korea, Argentina, Brazil, Canada, France, Germany, Indonesia, Italy, Mexico, Russia, Saudi Arabia, South Africa, and Turkey. Japan’s economic growth accelerated to an annual 4.9 percent pace in the first quarter, led by exports. Government reports today showed the unemployment rate rose to 5.1 percent in April, household spending fell and deflation deepened, underscoring the country’s reliance on demand from abroad. Consumer prices excluding fresh food slid 1.5 percent from a year earlier, the statistics bureau said. Spending by households dropped 0.7 percent. Kan said he will try to spur jobs to help overcome the country’s “mild deflationary phase.” “Employment conditions have an impact on deflation because if employment improves, that will help wage growth and narrow the gap between demand and supply,” he said. “I will work to improve employment with an understanding that it’s crucial factor to overcome deflation.” To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Hon Hai May Lift China Wages 20% After Spate of Suicides at Apple Supplier

May 27, 2010

By Janet Ong May 28 (Bloomberg) — Hon Hai Precision Industry Co ., the world’s largest contract manufacturer of electronics, is considering raising wages in China by 20 percent as the company faces a probe over suicides at its factories in the mainland. “This is not a plan we just came up with,” Edmund Ding , a spokesman for Hon Hai, said today in response to a report from Taiwan’s United Daily. “We have plans to raise the minimum wages and will be implementing them soon.” Ding declined to say when the change will be effective. The death toll of apparent suicides by Hon Hai Group workers has risen to 10 this year in the southern city of Shenzhen, prompting clients such as Apple Inc. and Hewlett- Packard Co. to begin probes on the supplier’s working conditions. Hon Hai Chairman Terry Gou on May 26 led media on a tour of the company’s Shenzhen factories and apologized for being unable to prevent the suicides. The Shenzhen police is investigating the suicides, said Li Ping, a spokesman for the Shenzhen municipal government. Wang Rong, communist party secretary of Shenzhen Municipal Committee, and other city officials such as the labor union officials went to the plant on May 26 to investigate, the government said in a statement on its website yesterday. To contact the reporter on this story: Janet Ong at jong3@bloomberg.net

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Asia Stocks Rise for a Third Day After U.S. Shares Rally; Euro Declines

May 27, 2010

By Nicolas Johnson and Masaki Kondo May 28 (Bloomberg) — Asian stocks rose for a third day, extending a rally that drove the U.S. benchmark equity index to its biggest gain in almost three weeks. The euro weakened on concern Europe’s fiscal crisis will lead to stricter regulations. The MSCI Asia Pacific Index climbed 1.8 percent as of 11:13 a.m. in Tokyo, heading for its longest streak of gains since April 7. Futures on the U.S. Standard & Poor’s 500 Index were little changed after the gauge’s 3.3 percent surge yesterday. The euro weakened against all 16 of its most-traded counterparts. This week’s advances in stocks and crude oil pared a rout in May that’s the deepest since October 2008, the month after Lehman Brothers Holdings Inc. collapsed. Equities, oil and metals climbed yesterday after China affirmed its commitment to investing in Europe, easing concern that the region’s fiscal crisis will stall a global economic recovery. “The market has priced in all the bad news for now,” said Tokyo-based strategist Ayako Sera at Sumitomo Trust & Banking Co., which manages $307 billion. “Stocks are undervalued, assuming Europe’s problems won’t spill over and cripple the global economy. Japan’s Nikkei 225 Stock Average gained 1.7 percent today, the steepest increase among equity benchmarks in the Asia- Pacific region. Canon Inc., a camera maker that counts Europe as its biggest market, climbed 2.7 percent. Mitsubishi Corp., Japan’s biggest commodities trader, rose 1.4 percent after yesterday’s gains in oil and metals. BHP Billiton Ltd. and Rio Tinto Group, the world’s No. 1 and No. 3 companies, climbed more than 0.9 percent in Sydney. Markets in Indonesia, Malaysia, Singapore and Thailand are closed today for a holiday. U.S. markets will be shut on May 31. To contact the reporters on this story: Nicolas Johnson in Tokyo at nicojohnson@bloomberg.net .

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Prudential’s $35.5 Billion AIA Bid Sours as Investors Swap Risk for Cash

May 27, 2010

By Kevin Crowley May 28 (Bloomberg) — Prudential Plc Chief Executive Officer Tidjane Thiam was handed the chance to make a $35.5 billion bid for insurer AIA Group Ltd. after his firm’s share price almost tripled. The biggest decline in equity markets since the financial crisis may derail his plans. Falling investor confidence sparked by Europe’s sovereign debt crisis hampered corporate fundraisings in the past two months as Thiam, 47, asks investors for $21 billion, the biggest rights offer for an acquisition on record. Thiam was in New York yesterday to make his case in person to American International Group Inc. executives that the price for AIA should be cut, said a person with knowledge of the situation. “It’s probably the least ideal market to raise capital,” said James Buckley , a London-based fund manager at Baring Asset Management Ltd. , who helps oversee $44 billion, including Prudential stock. “The market is not completely closed for small rights offers, but for major deals like Prudential, it’s inevitably tough.” Thiam said when he announced the offer in March that Prudential had “earned the right” to buy AIA after the stock jumped 191 percent to 602.5 pence in 12 months. The MSCI World Index plunged about 11 percent in the last six weeks, fueling shareholder criticism that Prudential is overpaying for AIA. BlackRock Inc. and Fidelity Investments are among major Prudential shareholders that have voiced concern the deal is too expensive, said the person, who declined to be identified because the discussions are private. Some shareholders are demanding a reduction to as low as $30 billion, a price AIG’s board is unlikely to approve, the person said. ‘Live Up to It’ “We have a signed agreement with Prudential, and we expect them to use their best efforts to live up to it,” said Mark Herr , a spokesman for New York-based AIG, in a statement late yesterday. Speculation the deal would collapse was “unfounded,” said Prudential spokesman Ed Brewster . “The acquisition of AIA by Prudential represents a compelling combination that can deliver very attractive long- term returns to our shareholders,” Brewster said. Investors owning as much as 20 percent of Prudential stock plan to vote down the takeover at the U.K. insurer’s annual general meeting on June 7, Neptune Investment Management Ltd. , a London-based shareholder, said this week. Thiam needs 75 percent of investors to support the rights offer for the deal to succeed. The Public Offering Option The U.S. Treasury Department, which helped fund the $182.3 billion bailout of AIG, has not asked the company to find a compromise on the AIA deal, spokesman Andrew Williams said in an e-mail. He commented after the Daily Telegraph reported that Treasury had encouraged the insurer to negotiate to preserve the takeover of AIA. AIG, which is selling assets to repay a U.S. bailout, had been planning a public offering of AIA until announcing the Prudential deal in March. AIG could return to the public- offering option if Prudential shareholders reject the deal, Jim Millstein , the Treasury’s chief restructuring officer, said this week in Washington. “It would certainly be a mistake to not be willing to renegotiate,” said Angelo Graci , managing director at Chapdelaine Credit Partners in New York. “There are meaningful risks to going back and pursuing an IPO; it would take longer, and the valuation would have a significant amount of uncertainty.” Largest Shareholders Prudential plans to fund the AIA purchase through a $21 billion rights offer, including fees to banks, $10.5 billion of new shares and other securities and by selling debt. The offer is the biggest in U.K. corporate history. Prudential has a market value of about 13.9 billion pounds. Capital Research & Management Co., Prudential’s biggest shareholder, would have to pay about 1.89 billion pounds ($2.75 billion) to take up its rights in full, data compiled by Bloomberg show. The next three biggest holders, Blackrock, Legal & General Group Plc and Norges Bank, would pay about 1.96 billion pounds among them if they decide to buy their full allocation of shares. Not all Prudential’s directors plan to take up their rights in full, Chairman Harvey McGrath said this week. Michael McLintock , CEO of Prudential’s fund management unit, would have to pay about 3.4 million pounds to fully back the transaction. “In uncertain times investors aren’t as willing to take as much risk, and it makes it harder to raise funds for expansion,” said Peter Braendle , who helps oversee about $51 billion at Swisscanto Asset Management AG in Zurich, and hasn’t decided whether he’ll back the rights offer. “Investors prefer to have a bit more cash.” Fundraisings Postponed At least 19 companies have postponed or withdrawn $5 billion in U.S. debt sales since April 13, data compiled by Bloomberg show. Investment banking fees from acquisition advice, share and bond sales in western Europe dropped 17 percent in the first four months of 2010 compared with the previous year, New York-based research firm Freeman & Co. said. Standard Chartered Plc , the London-based bank that makes most of its profit in Asia, received bids yesterday for about 11 percent of the shares available in an initial public offering in India with one day to go. “It’s not easy to get people to part with their money when they aren’t sure about the prospects for equity markets and are more focused on preserving their wealth,” said Mike Lenhoff , chief strategist at Brewin Dolphin Holdings Plc in London, which has 22 billion pounds under management. “It’s an extremely difficult background that presents major obstacles to people trying to sort out some corporate strategies.” Shares Gain Prudential gained 6.83 percent to 547.5 pence in London trading yesterday, the steepest increase since August, as investors speculated the takeover will fail. The insurer’s share price was 602.5 pence on Feb. 26, the last trading day before the deal was announced. Prudential shares were suspended from trading in Hong Kong today pending a statement of “price sensitive information,” according to a release to the city’s stock exchange. The combined Prudential-AIA would be the largest life insurer in Hong Kong, as well as in Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam. Paying $35.5 billion for AIA will create an entity worth $60 billion by 2013, Thiam said this month. “The deal raises the question why the company is trying to pursue it if a substantial number of shareholders are opposing it,” said Tom Kirchmaier , a fellow at the London School of Economics. “For me the concerns in the debt market just mirror those in the equity market, and the market might just kill a deal which it considers a bad deal.” To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

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CoStar’s People of Note (May 23-29)

May 27, 2010

This week’s People of Note includes the following markets: Atlanta, Charlotte, Houston Los Angeles, New York City and Retail LOS ANGELES, RETAIL Champion Targets $500M in Retail Acquisitions; Boss to Lead Initiative Champion Real Estate Co. announced…

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The Forum for Corporate Directors Names Cary Hyden of Latham & Watkins to Its Board of Directors

May 27, 2010

NEWPORT BEACH, CA–(Marketwire – May 27, 2010) –  The Forum for Corporate Directors has named Cary K. Hyden, a partner in the Orange County office of Latham & Watkins LLP, to the board of directors of FCD. Mr. Hyden joins a board comprised of directors and senior executive officers from leading Orange County companies, as well as leaders from several major legal and accounting firms which support these companies and their boards.

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The Forum for Corporate Directors Names Cary Hyden of Latham & Watkins to Its Board of Directors

May 27, 2010

NEWPORT BEACH, CA–(Marketwire – May 27, 2010) –  The Forum for Corporate Directors has named Cary K. Hyden, a partner in the Orange County office of Latham & Watkins LLP, to the board of directors of FCD. Mr. Hyden joins a board comprised of directors and senior executive officers from leading Orange County companies, as well as leaders from several major legal and accounting firms which support these companies and their boards.

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The Forum for Corporate Directors Names Cary Hyden of Latham & Watkins to Its Board of Directors

May 27, 2010

NEWPORT BEACH, CA–(Marketwire – May 27, 2010) –  The Forum for Corporate Directors has named Cary K. Hyden, a partner in the Orange County office of Latham & Watkins LLP, to the board of directors of FCD. Mr. Hyden joins a board comprised of directors and senior executive officers from leading Orange County companies, as well as leaders from several major legal and accounting firms which support these companies and their boards.

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The Forum for Corporate Directors Names Cary Hyden of Latham & Watkins to Its Board of Directors

May 27, 2010

NEWPORT BEACH, CA–(Marketwire – May 27, 2010) –  The Forum for Corporate Directors has named Cary K. Hyden, a partner in the Orange County office of Latham & Watkins LLP, to the board of directors of FCD. Mr. Hyden joins a board comprised of directors and senior executive officers from leading Orange County companies, as well as leaders from several major legal and accounting firms which support these companies and their boards.

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New Zealand Home-Building Approvals Surged 8.5% in April to Two-Year High

May 27, 2010
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KKR Is Said to End Talks With Hands’s Terra Firma on Takeover of EMI Label

May 27, 2010
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Hatoyama Discusses North Korea With Obama, Plans Okinawa Base Announcement

May 27, 2010

By Takashi Hirokawa and Sachiko Sakamaki May 28 (Bloomberg) — Japan’s Prime Minister Yukio Hatoyama spoke with President Barack Obama today ahead of announcing his plan to relocate a U.S. military base in Okinawa that has outraged local residents and caused dissension in his Cabinet. Hatoyama this week said he had “no choice” but to relocate the Futenma Marine Air Base within Okinawa, abandoning a campaign pledge to move it elsewhere. He cited security threats from countries such as North Korea, which has cut off ties with South Korea and threatened war after a report said it was behind a deadly attack on a South Korean naval ship. “We’ll present our conclusions today,” Hatoyama told reporters in Tokyo. He said Obama expressed his appreciation for resolving an eight-month dispute that had frayed ties. The two leaders discussed North Korean aggression and said they would respond through the United Nations Security Council, he said. The decision to keep the base on Okinawa is opposed by Japan’s Social Democratic Party , a minority member of Hatoyama’s Democratic Party of Japan -led government. SDP leader and Cabinet minister Mizuho Fukushima said she won’t support the agreement, and today reiterated that it is up to Hatoyama whether to fire her. To contact the reporters on this story: Takashi Hirokawa in Okinawa at thirokawa@bloomberg.net ; Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net

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BP’s `Top Kill’ Operation Stops Flow of Oil for Now in Biggest U.S. Spill

May 27, 2010

By Jim Polson May 27 (Bloomberg) — BP Plc made progress in efforts to stop the leak from its Gulf of Mexico well, the U.S. Coast Guard said, as a federal panel issued a new estimate indicating the offshore oil spill has become the largest in U.S. history. The well has been leaking oil at a “best initial” estimated rate of 12,000 barrels to 19,000 barrels a day, Marcia McNutt, head of a U.S. governmental panel, said today. At the midpoint of that rate, the well has exceeded the 262,000 barrels spilled by the Exxon Valdez in 1989 and the record 300,000- barrel spill by a tanker off the Oregon coast in 1968, according to statistics from the American Petroleum Institute. The company may have stopped the flow of oil from the well after pumping mud-like drilling fluid into it, U.S. Coast Guard Admiral Thad Allen said. Pumping will continue another 24 hour to 48 hours, Jon Pack, a BP spokesman, said in an e-mailed message sent about 5:30 p.m. New York time today. “Everybody is cautiously optimistic, but there’s no reason to declare victory yet,” Allen, National Incident Commander for the spill, said in an interview on WWL radio in New Orleans today. “They’ve had some success overnight” injecting heavy fluids into the well, part of a procedure known as “top kill,” he said. Success of top kill would bring to an end a leak that has poured an estimated 22 million gallons of oil into the Gulf and soiled 100 miles (161 kilometers) of coast. BP rose 28.8 pence, or 5.9 percent, to 520.8 pence at 4:35 p.m. in London trading. Double the Valdez Based on the midpoint of the best estimates released by the Flow Rate Technical Group, the well may have leaked about 527,000 barrels from the day the rig sank, April 22, through yesterday. That is more than double the Exxon Valdez’s 262,000- barrel spill in Alaska. The amount of oil being spilled will help determine BP’s liability for the leak. The top kill process uses drilling fluid to “arm wrestle” the gusher of oil and natural gas back into the well, Robert Dudley , managing director for the London-based company, said. ‘Ongoing’ Operation A live video feed provided by BP showed brown fluid flowing from the site. “The operation is ongoing, we’re not giving a commentary on it,” David Nicholas , a BP spokesman in Houston, said in a telephone interview. The well began leaking after an April 20 explosion and fire on the Deepwater Horizon drilling rig, which resulted in the deaths of 11 workers. BP leased the rig from Geneva-based Transocean Ltd. , the largest deep-water driller. Transocean rose as much as 9.1 percent today. The shares gained $1.13, or 1.9 percent, to $59.71 at 4:01 p.m. in New York Stock Exchange composite trading. Halliburton Co., which provided services on the rig, rose $1.20, or 4.7 percent, to $26.99. Cameron International Corp., which provided equipment for the rig, rose $2, or 5.5 percent, to $38.08. Anadarko Petroleum Corp., which owns a 25 percent stake in the well, rose $2.23, or 4.2 percent, to $55.57. “It will be Friday night or Saturday at the earliest before we know definitively that the well has been killed,” Robert MacKenzie , a Houston-based analyst for FBR Capital Markets, wrote today in a note to clients. “They are in the process of mixing more mud or perhaps even a junk shot to pump before they switch to cement to seal the well.” Junk Shot BP has said a “junk shot” injection of rubber scraps may be used as needed to seal leaks in the well piping so that enough pressure can be exerted on the column of oil and gas. An underwater oil plume from the spill may have spread 22 miles northeast toward Mobile, Alabama, a research vessel from the University of South Florida found in a preliminary report. The Weatherbird II’s initial tests show the highest concentrations of “dissolved hydrocarbons” were 400 meters (1,312 feet) underwater. Congress has scheduled at least 20 hearings on the Deepwater Horizon and offshore drilling since the rig exploded, and the Minerals Management Service and Coast Guard held another day of hearings in Louisiana on the reasons for the accident. Drilling Delay President Barack Obama today extended by six months a moratorium on new deep-water drilling permits that began after oil started to spill from BP’s well. The president also canceled a proposal to drill for oil off the coast of Virginia and planned drilling by Royal Dutch Shell Plc of exploratory wells in the Arctic off Alaska. The head of the Minerals Management Service, the federal agency that oversees offshore drilling, resigned today, according to Interior Secretary Ken Salazar . The spill has cost BP a total of $760 million, or about $22 million a day, the company said May 24. Average daily profit last year was $45 million a day, according to data compiled by Bloomberg . The federal government has spent more than $100 million responding to the spill and will be reimbursed by BP, Coast Guard Rear Admiral Mary Landry said yesterday. To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

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Malaysia Sells $1.25 Billion of Islamic Bonds, First Global Sale Since ’02

May 27, 2010

By Gabrielle Coppola May 27 (Bloomberg) — Malaysia sold $1.25 billion of five- year Islamic bonds in its first international debt sale since 2002. The 4 percent notes priced to yield 180 basis points more than U.S. Treasuries, according to Bloomberg data. Malaysia tapped the overseas debt market as the government aims to increase development spending and boost economic growth . The sale of the sukuk notes will set a new benchmark for pricing bonds in the nation, Prime Minister Najib Razak said on May 19. “Malaysia is oil-rich, the fundamentals are solid and they don’t have funding needs other than to set a benchmark in the fixed-income market,” Paul Chan , Hong Kong-based chief investment officer at Invesco Asia Ltd., said before the sale. “There will be scarcity value in Malaysia’s dollar bonds. Asian countries are generally underrated” given what’s happening in Europe, he said. The Southeast Asian nation has the world’s biggest market for Islamic bonds, which are backed by physical assets and pay profit rates instead of interest that is prohibited under Shariah principles. Malaysia accounted for 65 percent of outstanding sukuk in 2009, according to CIMB Group Holdings Bhd., one of the lead arrangers for the latest notes. The sukuk, which is of the Ijarah structure, were assigned debt ratings of A- by Standard & Poor’s and A3 from Moody’s Investors Service last week, the two company’s fourth-lowest investment grades. Greece, which sparked the European debt crisis amid concern about its ability to repay investors, has a junk, or high-risk, rating of BB+ from S&P. Bond Delay The latest bond issue would pay returns with rental income received by leasing 12 state-run hospitals, according to a sale document obtained by Bloomberg News last week. A decision on the timing and size of the note issue was delayed yesterday as concern about Europe’s debt crisis and tension on the Korean peninsula deterred investment in emerging- market assets. A rally in global stocks and pledges from Middle Eastern investors helped revive the deal, according to people familiar with the fund-raising, who didn’t want to be named. The premium investors demand to hold bonds in developing nations over U.S. Treasuries narrowed 18 basis points today to 322 basis points, according to JPMorgan Chase & Co.’s EMBI+ Index. A basis point is 0.01 percentage point. Malaysia’s state-owned Petroliam Nasional Bhd.’s 4.25 percent Islamic bonds due August 2014 yielded 3.92 percent, according to Royal Bank of Scotland Group Plc, or 207 basis points more than similar-maturity Treasuries. To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

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Standard Chartered’s $500 Million India Offer 90% Unsold With One Day Left

May 27, 2010

By Ruth David May 28 (Bloomberg) — With one day left to complete the offer, Standard Chartered Plc has yet to find buyers for almost 90 percent of $500 million of stock it is selling in India. The London-based lender that makes at least three quarters of its profit in Asia has received orders for 22.3 million shares, according the websites of the National and Bombay stock exchanges yesterday. Standard Chartered is seeking to become the first company to sell Indian depositary receipts. The four-day sale comes after concern Europe’s credit crisis will spread erased $5.7 trillion from stock markets worldwide this month. Seven managing underwriters may close the deal if they can convince investors that shares trading for 12.3 times projected 2010 profits , the average for banks in the MSCI World Index of 24 developed countries, are worth the risk. “Volatility is not good for fundraising, but after all it depends on the value,” said Robert Akester , a London-based fund manager who helps oversee $7 billion at Mondrian Investment Partners Ltd’s global emerging market fund. “The fact that it’s an IDR may prevent some funds from buying. Some clients set guidelines not to invest in IDRs because it’s not something they are familiar with.” Domestic insurance funds are prohibited from taking part in the sale, limiting potential buyers, said Prabodh Agrawal , an analyst at India Infoline Ltd. in Singapore, in a note to clients on May 24. Record stock purchases by insurers helped boost the benchmark Sensitive Index 81 percent in 2009, making it the third-best performing equity market in Asia. Hong Kong, London Standard Chartered, which is listed in Hong Kong and London, aims to raise as much as $573 million from the India offering, according to data compiled by Bloomberg. Ten IDRs will represent one share of Standard Chartered, the bank said in a filing on May 14. Its U.K. shares rose 4.4 percent to 1,682 pence yesterday. The bank is offering about 240 million IDRs at 100 rupees to 115 rupees each. It sold 15 percent of the offering to so- called anchor investors including ICICI Prudential Asset Management Co. and Reliance Capital Ltd. for 104 rupees a share, according to a regulatory filing this week. Stocks surged around the world yesterday and the euro snapped a three-day decline against the dollar as China said it remains a long-term investor in Europe, damping concerns that the region’s debt crisis will worsen. Financial shares in the MSCI Emerging Markets Index gained 1.9 percent on average, giving them the biggest two-day advance since July. Currency Risk “There’s still a reasonable chance that the order will be covered by the close,” said Colin McLean , who helps manage 650 million pounds ($944 million) including Standard Chartered stock at SVM Asset Management Ltd. in Edinburgh. “Pressures on the banking sector are easing off.” Investors may be deterred by regulatory risks tied to Standard Chartered’s global operations and concern about currency fluctuations affecting the IDRs, whose underlying shares are denominated in British pounds, Abhijit Majumder , an analyst at Prabhudas Lilladher Pvt. in Mumbai, wrote on May 24. UBS AG, Goldman Sachs Group Inc. , JM Financial Services Ltd., Bank of America Corp.’s Merrill Lynch & Co., Kotak Mahindra Capital Co. , SBI Capital Markets Ltd. and Standard Chartered-STCI Capital Markets Ltd. are managing the sale. Individuals and employees who bid for 100,000 rupees of shares or less will be eligible for a 5 percent discount on the final price, it said. Retail investors will get up to 30 percent of the issue and employees 2 percent. Standard Chartered, which counts India as its most profitable overseas market after Hong Kong, and rivals including Credit Suisse Group AG are seeking to win corporate clients in the world’s second-fastest growing major economy. The bank has been in India for more than 150 years. To contact the reporter on this story: Ruth David in Mumbai at rdavid9@bloomberg.net

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Bond Sales Drop to Lowest Level Since 2000 as Spreads Soar: Credit Markets

May 27, 2010

By Bryan Keogh and Sonja Cheung May 27 (Bloomberg) — Companies sold the least amount of bonds in a decade this month as concern that the burgeoning sovereign debt crisis in Europe will slow the global economy drove up relative borrowing costs by the most since the aftermath of Lehman Brothers Holdings Inc.’s collapse. Borrowers issued $61.1 billion of debt in currencies from dollars to yen, a third of April’s tally and the least since December 2000, according to data compiled by Bloomberg. At least 13 companies withdrew offerings, including New York-based retailer Jones Apparel Group Inc. and theater chain operator Regal Entertainment Group. “There’s still a lack of risk appetite for company debt,” said Ben Bennett , who helps manage the equivalent of $125 billion of corporate bonds as credit strategist at Legal & General Investment Management in London. “There needs to be a couple more days of stability before we see green shoots. At the moment it’s a small, straggly weed.” The extra yield investors demand to own corporate bonds rather than government debt soared the most since at least November 2008, according to Bank of America Merrill Lynch index data. Spreads widened 44 basis points to 193 basis points, according to Bank of America Merrill Lynch index data. Corporate credit has lost 0.65 percent this month, including reinvested interest, snapping four months of positive returns, index data show. ‘Volatility’ and ‘Uncertainty’ “The biggest issue is the volatility and the uncertainty about where financings can get completed and which ones can’t,” said Robert Harteveldt , global head of leveraged finance at Jefferies Group Inc. in Stamford, Connecticut. “You’ve started to see deals get pulled and there’s no question money has left the market.” While conditions improved this week, spreads will have to tighten before companies can sell debt again, Bennett said. Elsewhere in credit markets, credit-default swaps soared this month, while a benchmark for leveraged loan prices is poised to fall for the second straight week, the longest slump since Feb. 12. After rising to the highest since July, the London interbank offered rate shows signs of stabilizing. “Investors are looking to park their money in safe names at the moment as market conditions are so volatile,” said Harpreet Parhar , a credit strategist at Credit Agricole SA in London. Issuers may need as much as 10 days of market stability before they consider benchmark-size bond offerings, he said. Many “investment grade issuers prefunded last year, so there’s no pressure to come to the market,” he said. Default Swaps Credit-swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 11.6 basis points to a mid-price of 115.3 basis points as of 3:20 p.m. in New York, the biggest drop since May 10, according to Markit Group. The index, which traded as high as 127.1 yesterday, has risen 23.2 this month. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings surged 30 basis points this month to 117.2. That’s on pace for the biggest monthly increase since October 2008. The gauge fell 6.1 basis points today. The indexes rise as investor confidence in credit markets deteriorates. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. Loans, Libor Prices on the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, closed today at 89.06 cents on the dollar, down from 92.72 cents at the end of April. Leveraged, or high-yield, high-risk debt, is rated below Baa3 by Moody’s Investors Service and BBB-by S&P. About $19 billion of U.S. leveraged loans have been arranged this month, compared with $35 billion in all of April, according to Bloomberg data. The rate banks say they pay for three-month loans in dollars stabilized after rising for 12 days. Libor held at about 0.538 percent, according to the British Bankers’ Association, the highest level since July 6, data from the British Bankers’ Association show. Another metric of investor fear, U.S. swap spreads, narrowed. Two-year maturities recorded their longest streak of declines in two months, as traders pared hedges against the European debt crisis spreading to sap the credit quality of banks. The difference between two-year Treasuries and the rate to convert fixed payments to floating fell 7 basis points to 40.26, the first three-day decline since March 24. Downgrade Potential The decline came the same day as S&P said the chance of downgrade for U.S. non-financial companies is the lowest since July 1998, as the nation’s improving economy overshadows European debt strains threatening global growth. The proportion of corporate debt issuers with a negative outlook or on watch for a potential downgrade fell to 19 percent at the end of March, S&P said today in a report. In July 1998, it reached 18.4 percent. Ratings upgrades outpaced downgrades 105 to 70 this year through May 19, said S&P, a unit of New York-based McGraw-Hill Cos. In emerging markets, yield spreads narrowed 22 basis points to 317 basis points, the least since May 19, according to JPMorgan Chase & Co.’s Emerging Market Bond index. The spread has widened from this year’s low of 230 on April 15. Canceled Auction Brazil scrapped a portion of its weekly fixed-rate debt auction for the second time this month after Europe’s financial crisis drove up yields on the securities. The government rejected all bids for 150 million reais ($83 million) of fixed- rate notes maturing in 2021 on offer, according to a statement posted on the central bank’s website. On May 6, officials also rejected bids for bonds due in 2021. Global corporate bond issuance plunged this month as Europe’s leaders failed to convince investors they can tame the region’s debt crisis and Bill Gross , manager of the world’s biggest bond fund, said a Greek restructuring is inevitable. “The growth required in order to shoulder Greece’s debt burden is so excessive and the fiscal restrictiveness being imposed on the country is so restrictive there will be no way out,” Pacific Investment Management Co.’s Gross said in a May 26 interview with Bloomberg Television. Companies issued 8.75 billion euros ($10.8 billion) of debt in Europe in May, the slowest month on record, as investors shunned riskier assets and sought so-called safe haven securities amid the European debt crisis. Sales in the U.S. fell to $33 billion, the least since November 2008, when issuance totaled $45.8 billion, Bloomberg data show. U.S. Issuance Companies that sold debt this week included Abbott Laboratories , the maker of the arthritis drug Humira, and Goldman Sachs Group Inc. Abbott offered $3 billion of bonds in a three-part offering and Goldman Sachs , the New York-based bank, issued $1.25 billion of debt due in 2020. Abbott’s $1 billion of 10-year notes priced to yield 90 basis points more than Treasuries, compared with the 220 basis- point spread it paid when it sold $2 billion of debt due 2019 in February 2009. Goldman Sachs paid a spread of 280 basis points, more than it paid March 19 when it sold $750 million of 10-year, 5.375 percent notes at a spread of 175 basis points, Bloomberg data show. European banks sold $12.6 billion of debt globally this month, the least since at least 1999, Bloomberg data show. The financial primary market in Europe has been “slammed shut” since April 15, according to Suki Mann , head of Societe Generale SA’s credit strategy group in London. Market ‘Lepers’ Banks globally may have a capital deficit of more than $1.5 trillion by the end of 2011 and some may require state support, according to Independent Credit View, a Swiss rating company. Banks “must feel like the lepers of the financial markets,” Mann wrote in a report. Spreads on investment-grade bonds widened 44 basis points in May to 193 basis points, the biggest monthly increase since they soared 108 basis points in October 2008, according to Bank of America Merrill Lynch index data. The average premium reached 196 basis points on May 25, the widest since October. “Market sentiment remains fragile,” said Simon Ballard , a senior credit strategist at Royal Bank of Canada. There’s “little evidence of any fundamental change in the outlook for risk assets.” High-yield spreads widened 154 basis points to 727 basis points, the index data show. Overall yields on the debt jumped to 9.54 percent this week, the highest since February. “We know it cost us a little bit in rate, because we would have gotten a better rate if we had not come out during the turmoil,” said Eric DeMarco , chief executive officer of San Diego-based Kratos Defense & Security Solutions Inc., which sold $225 million of seven-year 10 percent notes on May 12. “By the time we priced, we understood that practically every other deal had been pulled.” To contact the reporters on this story: Bryan Keogh in London at bkeogh4@bloomberg.net ; Sonja Cheung in London at scheung58@bloomberg.net

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Japanese Prices Decline, Unemployment Rises in Signs Recovery Is Slowing

May 27, 2010

By Aki Ito May 28 (Bloomberg) — Japan’s unemployment rate unexpectedly increased in April and the decline in consumer prices deepened, signaling that domestic demand is restraining the nation’s recovery from its deepest postwar recession. The jobless rate rose to 5.1 percent from 5 percent, the statistics bureau said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for no change. Prices excluding fresh food slid 1.5 percent from a year earlier after dropping 1.2 percent in March. The reports come a day after government figures showed a sustained rebound in exports, driven by demand from Asia’s emerging economies, and highlight Japan’s reliance on trade to sustain growth. The export revival hasn’t been strong enough to spur hiring that would in turn boost household spending, which unexpectedly fell in April, today’s data showed. “It’ll probably take until next fiscal year for companies to step up hiring,” Noriaki Matsuoka , an economist at Daiwa Asset Management Co. in Tokyo, said before the reports. The Nikkei 225 Stock Average has tumbled 12 percent this month on concern that the European sovereign debt woes may derail the global recovery. It rose 1.5 percent at 9:08 a.m. in Tokyo as China’s commitment to investing in Europe allayed concern the crisis will worsen. The yen traded at 90.99 per dollar from 90.98 before the reports. Household spending dropped 0.7 percent in April from a year earlier, the bureau said. The median estimate of economists surveyed was for a 2.5 percent increase. Retail sales rose 4.9 percent from a year earlier, led by gas stations and auto showrooms. Fading Stimulus Japan’s economy expanded at a 4.9 percent annual pace in the three months ended March, extending its rebound from its worst postwar recession, data showed last week. That report showed that outlays on durable goods increased at a slower pace, while spending on other components failed to pick up, adding to concerns that stimulus boosts are fading. Government programs have provided incentives for people to buy cars and electronics. Finance Minister Naoto Kan cited “severe” job prospects this week as one factor that has kept the government from upgrading its assessment of the economy since March. A separate government report today showed the ratio of jobs to applicants fell to 0.48, meaning there are 48 jobs for every 100 candidates. It was the first deterioration in the measure in eight months. Takeda Pharmaceutical Co. aims to reduce its workforce by about 10 percent, it said this month. Asia’s largest drugmaker wants to save 50 billion yen ($550 million) over three years. The drop in consumer prices was exacerbated by the introduction of a government waiver on high school tuition fees as part of a pledge to assist households. Prices fell at a faster rate than the 1.4 percent median estimate of economists. Bank of Japan “Excluding the school fee effect, which is temporary, downward pressure on prices will keep waning, but the pace will be very slow,” said Hiroshi Watanabe , a senior economist at Daiwa Institute of Research in Tokyo. “Given this, the Bank of Japan’s exit from its emergency policy mode is still remote.” Japanese retailers continue to cut prices to spur consumer spending. Nitori Co. , a furniture retailer, this week said it will lower prices of about 500 items by as much as 40 percent – - the company’s ninth round of discounts since 2008. “Spending on some items, such as cars and home electrical appliances, are robust thanks to government subsidies, but consumers are still penny-pinching for everyday products,” said Daiwa Research’s Watanabe. Faced Pressure The Bank of Japan has faced pressure to fight deflation from the government, whose ability to spur the economy is constrained by record public debt . Kan has been urging the bank to adopt an inflation target, and last week repeated that he expects it to support the recovery. Central bank Governor Masaaki Shirakawa this week warned against becoming too fixated on prices when setting policy. Central banks should aim to achieve a stable financial environment that helps sustain growth, and price stability is “not the sole factor,” he said. The central bank last month began developing measures to encourage banks to lend in areas that may spur growth. It has held the benchmark interest rate at 0.1 percent since December 2008 and offered banks 20 trillion yen in three-month loans under a separate program. To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

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Euro Weakens Versus the Yen Amid Concern Crisis to Spur Tougher Regulation

May 27, 2010

By Yoshiaki Nohara and Ben Levisohn May 28 (Bloomberg) — The euro fell against the yen, heading for a fifth weekly loss, as concern Europe’s fiscal crisis will lead to stricter financial regulations damped demand for higher-yielding assets. The common currency was set for a sixth monthly drop against the dollar after U.S. Treasury Secretary Timothy Geithner said the U.S. and Europe are in “broad agreement” on the need for tighter market regulation. The dollar was near a one-week high against the yen before reports forecast to show U.S. consumer spending and incomes rose in April. “The euro-negative trend hasn’t changed as the crisis spreads from Greece to Spain and Portugal,” said Marito Ueda , senior marketing director at FX PRIME Corp., a foreign-exchange margin company in Tokyo. “They can’t solve this problem within a day or two. Investors can’t buy back the euro aggressively.” The euro fell to 112.21 yen at 8:02 a.m. in Tokyo from 112.55 in New York yesterday, having dropped 0.8 percent this week. Europe’s currency was at $1.2345 from $1.2362. It has declined 7.2 percent this month. The dollar fetched 90.94 yen from 91.04 after touching 91.09 yesterday, the highest since May 20. The 16-nation currency has lost 7.7 percent this year, based on Bloomberg Correlation-Weighted Indexes. The dollar is up 8.9 percent, and the yen has advanced 11.6 percent. Geithner, who stopped off in Frankfurt on his way to Berlin, said he discussed “all the key elements” on the financial regulation agenda with European Central Bank President Jean-Claude Trichet and Bundesbank President Axel Weber . ‘Broad Agreement’ “The U.S. and Europe are in broad agreement on the importance of putting in place more conservative” approaches to taking risk, Geithner said yesterday. While there’s a need to get the “balance right” and there are “different systems” in place, “we all agree you want to have more conservative constraints on leverage and capital.” Consumer spending in the U.S. gained 0.3 percent in April, according to the median estimate of economists in a Bloomberg News survey before Commerce Department data today. Incomes climbed 0.4 percent, according to another survey. Losses in the euro were limited as China’s foreign- exchange regulator affirmed its commitment to investing in Europe, damping concern investors may flee the common currency. China’s State Administration of Foreign Exchange, or SAFE, which manages the nation’s $2.4 trillion of foreign-exchange reserves, the world’s largest, said in its statement yesterday that “the media report that SAFE is reviewing its euro holdings was groundless,” without specifying the media. The Financial Times reported this week that the agency was reviewing its euro-region debt holdings and that its representatives had met with foreign bankers in recent days to discuss the matter. “Europe has been, and will be, one of the major markets for investing China’s exchange reserves ,” SAFE said on its website. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net ; Ben Levisohn in New York at blevisohn@bloomberg.net .

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