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China Will Seek to Limit Inflation Rate to 5%, Morgan Stanley’s Roach Says

by on March 11, 2010

By Bob Willis and Thomas Keene March 11 (Bloomberg) — China won’t allow its inflation rate to exceed 5 percent, said Stephen Roach, chairman of Morgan Stanley Asia Ltd., after a report today showed the country’s consumer prices rose at the fastest pace in 16 months. “They certainly don’t want inflation to go anything in excess of, I’d say, 4.5 to 5 percent, they will lean against that, they will lean against property bubbles,” Roach said today in a Bloomberg Radio interview. “They are very focused on economic and financial stability.” It’s hard to get a “clean read” on market-based inflation in China, he said, because most utility prices are regulated. “They are now moving back up to a positive inflation rate, in a 3 to 4 percent zone, after going through deflation in the crisis,” Roach said. Consumer prices rose 2.7 percent in February from a year earlier, the National Bureau of Statistics said today in Beijing. The increase was more than the 2.5 rate forecast by economists and adds to the case for the government to pare back stimulus measures after production jumped 20.7 percent in the first two months of 2010, the most in more than five years. Roach said he didn’t expect any “dramatic” policy announcements in coming weeks. In the period between Premier Wen Jiabao’s annual speech to the National People’s Congress this month and the launch of the 12th Five-Year Plan early next year, China is likely to focus on “traditional, counter-cyclical stabilization policies,” he said. Such policies would probably focus on bank reserve requirements, “maybe a small currency adjustment” ahead of the U.S. Treasury’s biannual foreign-exchange report next month, and “possibly an interest rate hike or two.” Excessive Lending Another element of China’s policies would be the ongoing “clamp-down on excessive lending” for property speculation, he said. China’s 12th Five-Year Plan, which is being drafted in government agencies and ministries, is likely to be a “watershed event,” said Roach. “It’s going to shift the model to more of a pro- consumption model” from communist China’s dependence on exports and investment, he said. “The export and investment dynamic has pretty much outlived its useful purpose, especially in this post-crisis period where consumers in the West are going to be struggling for a number of years.” Roach also said the International Monetary Fund, rather than the European Union, is best placed to enforce the economic adjustments that Greece must take to overcome its budget crisis. “Long-term financing for Greece needs to come from within, and the IMF is the best institution to force that type of adjustment,” he said. “It sends a horrible signal to the rest of Europe, that they condone bad behavior,” should the European Union lead a rescue for Greece. To contact the reporter on this story: Robert Willis in Washington at bwillis@bloomberg.net

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Turbines Blur Good View of U.S. Business Investment, Economist Feroli Says

by on March 4, 2010

By Courtney Schlisserman March 4 (Bloomberg) — Seasonal quirks in demand for turbines means the outlook for U.S. business investment isn’t as “dire” as implied by today’s factory orders report, according to economist Michael Feroli . Orders for non-defense capital goods excluding aircraft fell 4.1 percent in January and shipments, a measure used in calculating gross domestic product, declined 1.7 percent, a report today from the Commerce Department showed. The biggest component in both cases was turbines, which are expensive machines used to generate power. “The culprit here is turbines,” Feroli, an economist at JPMorgan Chase & Co. in New York, said in an interview. “You smooth it out and things weren’t as robust as they seemed in December, but maybe not as dire as they seemed in January.” Gains in manufacturing helped pull the economy out of the worst recession in seven decades last year, and continued strength is now needed to spur other parts of the economy. A report yesterday showed service industries expanded last month at the fastest pace in more than two years. The sheer size of turbine and generator orders may explain why they are the “most volatile” part of the factory orders report and therefore difficult to adjust for seasonal variations, said Chris Savage, an economist at the Census Bureau who works on the factory orders release. Each turbine can cost millions of dollars and companies may try to close deals at the end of the year, resulting in large increases in the measure in December followed declines in January, Savage said. The government’s figures show turbine and generator bookings have fallen in eight of the past 10 Januaries and shipments declined in every one of those years. Sustained Gains Excluding turbines and aircraft, another volatile component, shipments of capital goods climbed in the five months to January, when they increased 0.9 percent, Feroli said. The declines in orders and shipments of equipment reported today “don’t change our opinion that capital spending is recovering,” said Aaron Smith , an economist at Moody’s Economy.com in West Chester, Pennsylvania. “There’s always a tendency for the turbines and generator category to be weak in the first month of the quarter and stronger in the last month and that trend is particularly strong for the first part of the year.” The economy grew at a 5.9 percent annual pace in the fourth quarter of last year, the fastest in six years. Spending on equipment and software rose at an 18 percent annual pace during the period, the strongest rate of growth since 2000, according to Commerce Department data. Sentiment Measures Sentiment measures, which may not be as influenced as orders by the value of goods, are showing manufacturing has continued to prosper this year. The Institute for Supply Management’s manufacturing gauge showed expansion for a seventh straight month in February. Qualcomm Inc. , the world’s biggest maker of mobile-phone chips, said March 2 it expects second-quarter sales and profit to be at the higher end of its forecast range and cited improving handset shipments. The company’s customers are telling it that phone shipments are showing “respectable year-over-year improvements,” Chief Financial Officer Bill Keitel said at Qualcomm’s annual shareholder meeting. To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net .

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Video: Brinkmann Says New U.S. Mortgage Delinquencies Declining: Video

February 19, 2010

Feb. 19 (Bloomberg) — Jay Brinkmann, chief economist at the Mortgage Bankers Association, talks with Bloomberg’s Carol Massar and Matt Miller about the outlook for U.S. mortgage delinquencies and foreclosures. A record number of Americans were in danger of losing their homes in the fourth quarter, even as new delinquencies declined, the Washington-based trade group said in a report today. (Source: Bloomberg)

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Pension Gap Exceeding $1 Trillion Presents `Daunting’ Bill to U.S. States

February 18, 2010

By Darrell Preston and Nanette Byrnes Feb. 18 (Bloomberg) — U.S. states must contend with a more than $1 trillion gap between what they have saved and what they have promised to retired workers for pension and health-care benefits, the Pew Center on the States said in a report today. States have saved $2.35 trillion of the $3.35 trillion owed to workers as of mid-2008, the center said. The Washington-based group expects the deficit to grow because of investment losses states sustained in the second half of 2008, the report said. Illinois, Connecticut and New Jersey were among the 16 lowest-ranked in terms of funding pension and retiree health care, according to Pew. The gap reflects “states’ own policy choices and lack of discipline” in failing to set aside enough money and expanding benefits without deciding how to pay for it, the report said. “States don’t manage this liability and the costs continue to go up,” said Susan Urahn , managing director for the Pew Center, in a conference call with reporters yesterday. “States will either have to make cuts in other priorities or raise taxes.” Local governments’ borrowing costs in the U.S. municipal bond market may rise because companies that grade the debt factor in the liability, said Urahn. Investors seek higher yields when ratings are lower to compensate for the perception of greater risk. $3 Trillion The gap that Pew calculated may be one-third that estimated by Orin S. Kramer , chairman of New Jersey’s State Investment Council and manager of Boston Provident Partners, a hedge fund. Kramer projected a $2 trillion unfunded liability for public pension funds and a $1 trillion gap for health-care benefits for retired public employees, according to a January commentary published by Bloomberg. Underfunding of pensions has been cited in rating cuts or negative outlooks for Connecticut, Nevada and New Jersey, said Edith Behr , a senior credit officer with Moody’s Investors Service. “States have less money to pay for services that are absolutely expected,” Behr said in an interview. “It’s when you get to times like this when you start having to make some of the tough choices, cutting back services, cutting back staff, raising taxes.” Urahn called the pension gap “perhaps the most daunting” of all the bills that will come due for states and municipalities. The full payment for plans the study looked at was $108 billion last year, compared with spending of $152 billion on higher education. Florida, Idaho, New York and North Carolina entered the recession with fully funded pensions, the report said. Twenty states have saved nothing for future obligations for health care and other benefits. California’s Obligations California, the most-populous U.S. state, owes $51.8 billion for future retiree health and dental costs, an increase of $3.6 billion from a year earlier, said state controller John Chiang in a press release Feb. 9. At the same time the state faces a budget deficit of $20 billion over the next 18 months. The state can’t ignore its promised benefits “even as we try to claw our way out of the recession and provide needed cash to the state’s coffers,” Chiang said in a statement. Fitch Ratings, which hasn’t seen states cutting back on funding pensions, is monitoring for such steps because of the tendency by states to trim contributions in past recessions, Richard Raphael , an analyst with Fitch, said in an interview. Illinois sold bonds last month to cover its pension liability. To contact the reporters on this story: Darrell Preston in Dallas at dpreston@bloomberg.net ; Nanette Byrnes at nbyrnes@bloomberg.net .

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Euro Trades Near Nine-Month Low Verus Dollar on Worries Over Greece’s Debt

February 15, 2010

By Yasuhiko Seki Feb. 16 (Bloomberg) — The euro traded near the lowest level in almost nine months as European leaders refused to detail how they would rescue debt-laden Greece if it fails to finance its debt. The 16-nation currency may decline for a fifth-straight day against the dollar as Greece’s finance minister said his task was akin to changing “the course of the Titanic.” The dollar may rise against the yen before a report forecast to show manufacturing in the New York region improved this month. “The market has been a little disappointed with the lack of progress to date, so we need something reasonably definitive in terms of support for Greece,” said Mike Jones , a currency strategist in Wellington at Bank of New Zealand Ltd. “We’re not going to see a recovery in risk appetite, and we may see the euro continue to slide” until that happens. The euro traded at $1.3600 as of 9:47 a.m. in Tokyo from $1.3598 in New York yesterday. The currency reached $1.3532 on Feb. 12, the lowest since May 19. The euro was at 122.43 yen from 122.38 yen yesterday. The dollar traded at 90.01 yen from 90.02 yen in New York. Greece will report to the European Commission on March 16 on its efforts to cut the EU’s biggest budget deficit by 4 percentage points of gross domestic product this year. If not enough progress is made, the EU “will impose on Greece the acceptance of additional measures,” Luxembourg’s Jean-Claude Juncker said after leading a meeting of euro-area finance ministers in Brussels. Greece will be excluded from a vote on additional deficit measures, he said. ‘Terrible Mess’ “People think we are in a terrible mess,” Greek Finance Minister George Papaconstantinou said. And we are.” After the minister’s comments, the yield on Greece’s two- year bond rose to as high as 5.230 percent, compared with 5.1547 percent on Feb. 12. The government of Prime Minister George Papandreou has pledged to slash the shortfall to the EU limit of 3 percent in 2012 by cutting spending, freezing wages, raising taxes, and cracking down on tax evasion. It has set a target of 8.7 percent of GDP for this year, even as its cost-cutting moves have triggered strikes. Former European Central Bank Chief Economist Otmar Issing said bailing out Greece would deal a “major blow” to the euro’s credibility. “The viability of the whole framework — nothing less –is at stake,” Issing, a founding member of the ECB’s executive board, wrote in the Financial Times. “Financial assistance for countries that violated the terms of their participation in EMU would be a major blow for the credibility of the whole framework.” Adding to pressure on the euro, a report today may show lower investor confidence in Germany, the region’s biggest economy. The ZEW Center for European Economic Research’s index of investor and analyst expectations, which aims to predict developments six months ahead, fell to 41.0 in February from 47.2 in the previous month, according to a Bloomberg News survey of economists. Fed Rates The dollar may advance for a third day against the yen on prospects that the world’s largest economy is gaining traction. The Federal Reserve Bank of New York’s general economic index climbed to 18.0 in February from 15.92 in the previous month, according to the median estimate of 43 economists surveyed by Bloomberg. Fed Chairman Ben S. Bernanke said last week the central bank may raise the discount rate “before long” as economic stimulus measures are unwound. Futures trading in Chicago showed yesterday a 48 percent chance that the Fed will raise its target lending rate by at least a quarter-percentage point by its September meeting, up from 46 percent a week ago.] Bank of Japan Governor Masaaki Shirakawa and his colleagues will maintain the key interest rate at 0.1 percent at their Feb. 17-18 gathering, according to all 16 economists surveyed by Bloomberg. — With assistance from Emma Ross-Thomas in Madrid, Candice Zachariahs in Sydney, Mayumi Otsuma and Keiko Ujikane in Tokyo. Editors: Rocky Swift To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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Japan’s Economy Probably Grew Most in Almost Two Years on Export Recovery

February 14, 2010

By Keiko Ujikane and Minh Bui Feb. 15 (Bloomberg) — Japan’s economic growth probably accelerated last quarter as a global trade revival fueled demand for exports, economists said before a report today. Gross domestic product rose an annualized 3.5 percent in the three months ended Dec. 31, the fastest pace since the first quarter of 2008, according to the median estimate of 25 economists surveyed by Bloomberg News. The Cabinet Office is scheduled to release the report at 8:50 a.m. in Tokyo. Nissan Motor Co. and Canon Inc. are among companies benefiting from resurgent global demand as countries poured more than $2 trillion into their economies to spur growth. The export rebound may be too weak to shore up spending at home, where wages are tumbling and consumer outlays have been propped up by government incentives that are starting to wear off. “Exports have grown on the back of the ongoing recovery in the global economy, including Asia as a driving force,” said Saori Tsuiki , an economist at Mitsubishi Research Institute in Tokyo. Yet growth in consumer spending “may have slowed and the stimulus effect will probably run its course.” Gains in the Nikkei 225 Stock Average stalled this year after a 19 percent advance in 2009, reflecting concerns about the resilience of the global recovery. The yen, which hit a 14- year high against the dollar in November, has gained 6 percent in the past six months, threatening exporters’ profits. Asia spearheaded Japan’s revival at the end of 2009, led by China, which last year overtook the U.S. as Japan’s largest foreign customer. U.S. demand is also improving after the nation’s GDP expanded the most in six years last quarter. Still, a report last week showed Europe’s economy almost stalled in the period, underscoring the frailty of the world recovery. Nissan, Canon Nissan, Japan’s third-largest carmaker, last week forecast a return to profit for the year ending March 31, citing government incentives that boosted sales in China and Japan. Canon , the world’s largest camera maker, is predicting its biggest annual profit increase in a decade amid revived demand. Japan’s economy expanded 0.9 percent from the previous quarter, accelerating from 0.3 percent, the survey showed. Overseas shipments increased 5.3 percent on a quarterly basis, analysts surveyed said. Net exports, or shipments minus imports, may have added 0.5 percentage point to growth. The Cabinet Office said on Feb. 3 that it will change the way it calculates exports and imports on a seasonally adjusted basis to account for the anomaly created by the financial crisis in 2008. The announcement prompted economists to cut their annualized GDP forecasts by about 1 percentage point. Hatoyama’s Stimulus The faster growth may not be enough to convince Prime Minister Yukio Hatoyama that the recovery is sustainable, as deflation deepens. The premier, facing upper house elections in July, is implementing a 7.2 trillion yen ($80 billion) stimulus package that his administration estimates can boost growth by about 0.7 percentage point next fiscal year. Even if GDP is strong, “Hatoyama may compile an additional stimulus as he wants to lure voters ahead of the election, especially when his popularity is sliding,” said Susumu Kato , Tokyo-based chief Japan economist at Credit Agricole Securities Asia. Household sentiment rose in January from a six-month low amid signs that the job market is improving even as incomes continue to decline, a Cabinet Office report showed last week. While the unemployment rate declined to 5.1 percent in December, wages slumped at a near-record pace. Consumer spending probably rose 0.3 percent last quarter, a third of the pace of the previous three months, according to the median estimate of economists. Capital investment may have risen 1.5 percent, the first positive reading in seven quarters. Deflation Lingers Spending remains too weak to stamp out deflation. The GDP deflator , a broad measure of price trends, is forecast to have fallen 2.3 percent in the quarter, the biggest decline in almost eight years. The prospect of continued deflation will prompt the Bank of Japan to keep the benchmark interest rate at 0.1 percent for at least all of this year, according to all 17 economists surveyed by Bloomberg News last month. The central bank’s two-day policy meeting ending Feb. 18 is “likely to be a non-event,” said Julian Jessop , chief international economist at Capital Economics Ltd. in London. While there’s a “compelling case” for more monetary easing, the bank will “be even more happy to sit on its hands this week following an upbeat GDP release,” he said. To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net ; Minh Bui in Tokyo at mbui@bloomberg.net

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Euro Area Is Headed for Break-Up, Societe Generale’s Albert Edwards Says

February 12, 2010

By Alexis Xydias Feb. 12 (Bloomberg) — Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, a situation that will lead to the break-up of the euro bloc, according to Societe Generale SA strategist Albert Edwards . The problem for countries including Portugal, Spain and Greece “is that years of inappropriately low interest rates resulted in overheating and rapid inflation,” London-based Edwards wrote in a report today. Even if governments “could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable break-up of the euro zone.” The euro has slumped 9.9 percent against the dollar since November on concern countries including Greece will struggle to tame their budget deficits. The common currency and stocks in the region dropped yesterday as European leaders closed ranks to defend Greece in a plan that investors said lacked details. The euro fell for a third day against the dollar, to $1.3557 as of 10:35 a.m. in London. Europe’s recovery almost stalled in the fourth quarter, as gross domestic product in the 16-nation euro region rose a less-than-expected 0.1 percent from the third quarter, the European Union’s statistics office in Luxembourg said today. Padoa-Schioppa Tommaso Padoa-Schioppa , a former European Central Bank executive board member and Italian finance minister, said today there was no possibility of a partition of the euro-zone. “I don’t think there is any prospect for such an event and I don’t think it makes much sense to talk about it,” he said in an interview on Bloomberg Television. Edwards was voted second-best European strategist in a 2009 Thomson Extel survey released in June and is known for his bearish views on equities. The report also named Societe Generale as the top economics and strategy research firm for a third straight year. After a three-month long plunge in Greece’s bonds amid speculation it was facing the threat of default, the euro region’s leaders yesterday ordered the country to slash its budget deficit and warned investors they would be willing to defend the country from speculative attack if necessary. Portuguese and Spanish bonds also declined this month on concern those countries may also need to cut spending. Strikes Prime Minister George Papandreou’s drive to get Greece’s ballooning budget under control is being challenged in the streets by striking schools, hospitals and airline employees. “Unlike Japan or the U.S., Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain,” Edwards wrote. Consigning the countries in southern Europe with the weakest finances “to a prolonged period of deflation is most likely to impose too severe a test on these nations.” To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net .

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U.S. Home Sales Increased in Fourth Quarter as Tax Credit Boosted Demand

February 11, 2010

By Kathleen M. Howley Feb. 11 (Bloomberg) — U.S. home sales increased 14 percent in the fourth quarter as a Federal Reserve program to purchase mortgage bonds and a tax credit for property buyers boosted demand for real estate. Sales of existing single-family homes, condominiums and cooperatively owned apartments rose to 6.03 million at an annualized, seasonally adjusted, rate from 5.29 million in the previous quarter, the National Association of Realtors said in a report today. The median price fell 4.1 percent from a year earlier, dropping in about half of U.S. cities, the Chicago- based trade group said. Government stimulus programs including the Fed’s effort to lower home-loan rates by purchasing mortgage bonds lifted the real estate market in the closing months of 2009, said Stan Humphries , chief economist at Zillow.com in Seattle. A “double dip” in home prices is possible after the Fed’s program ends in March and the tax credit expires at the end of April, he said. “What we’re seeing playing out in the marketplace is really a battle between market fundamentals on the one hand and market intervention, primarily in the form of federal policy support, on the other hand,” Humphries said. President Barack Obama in early November extended the tax credit beyond its original Nov. 30 deadline. The new version keeps the $8,000 first-time homebuyer benefit and makes a smaller credit available to some move-up buyers. To qualify, people must have a signed contract on a property by the end of April and purchase it before July 1. Record Mortgage Rates The Fed began purchasing $1.25 trillion of bonds backed by home loans last year in an effort to drive down fixed mortgage rates. The rate dropped to an all-time low of 4.71 percent during the first week of December, according to McLean, Virginia-based Freddie Mac. This week it is 4.97 percent. The Fed’s program is set to end this quarter. Home sales rose 4.9 percent last year to 5.16 million, the first annual gain since 2005, the National Association of Realtors said in a Jan. 25 report . In 2011, sales may increase 9.9 percent, the trade group said. U.S. home prices fell 12 percent in 2009 to a median of $173,500, a greater decline than 2008’s 9.5 percent drop. This year, prices may rise 3.7 percent, the first gain since 2006, according to a forecast on the trade group’s Web site. The U.S. median home price tumbled 28 percent over three years to a seven-year low of $164,800 in January 2009, the month before Congress passed the American Recovery and Reinvestment Act authorizing the tax credit, according to the NAR. The median had reached a record high of $230,300 in July 2006. To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net .

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Service Industries in U.S. Probably Grew in January as Recovery Broadened

February 3, 2010

By Bob Willis Feb. 3 (Bloomberg) — Service industries in the U.S. probably expanded in January at the fastest pace in more than a year, a sign the recovery is broadening, economists said before a report today. The Institute for Supply Management’s index of non- manufacturing companies, which make up almost 90 percent of the economy, rose to 51 from 49.8 in December, according the median estimate of 75 economists surveyed by Bloomberg News. Readings above 50 signal growth. A separate report may show companies last month cut the fewest jobs in two years. Growing exports and efforts to stabilize inventories stoked a factory rebound six months ago that is strengthening and spreading to other areas, giving companies like United Parcel Service Inc. a lift. The recovery has yet to generate the jobs needed to boost consumer spending back to pre-recession levels, one reason why the Federal Reserve has pledged to keep interest rates low. “We are in a sustainable, but somewhat slow, recovery,” said Zach Pandl , an economist at Nomura Securities International Inc. in New York. “Services didn’t contract as much as manufacturing in the recession and they aren’t rebounding as fast.” The report from the Tempe, Arizona-based purchasers’ group is due at 10 a.m. New York time. Survey estimated ranged from 49 to 53. Private Payrolls Figures from ADP Employer Services today showed companies cut an estimated 22,000 jobs in January, in line with forecasts. The drop was the smallest in two years and followed a revised 61,000 decrease the prior month. The ADP report includes only private payrolls and doesn’t take into account government employment. The economy probably created more jobs than it lost in January for the second time in the past three months, economists project a Feb. 5 report from the Labor Department will show. Payrolls rose by 8,000 employees last month, according to the median estimate of economists surveyed, as the federal government began hiring temporary workers to carry out the 2010 population count. Retailers are among companies still cutting jobs. Atlanta- based Home Depot Inc. last week began eliminating 1,000 positions after sales at older stores fell 6.9 percent in the quarter ended Nov. 1. “Household spending is expanding at a moderate rate, but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit,” Fed policy makers said after their meeting last month. The central bankers kept the benchmark interest rate on overnight loans between banks near zero and said it would remain “low” for an “extended period.” Lags Manufacturing The ISM services survey includes industries like retailing, utilities, health care, housing, transportation and finance and insurance. The measure has lagged behind the group’s manufacturing gauge, which rose in January to the highest level in five years as factories ramped up production to rebuild inventories and meet increasing global demand. The economy grew at a 5.7 percent annual pace in the fourth quarter, the most in six years, the government reported last week. It was the second quarter of growth following a year-long contraction that marked the deepest recession since the 1930s. Consumer spending which accounts for 70 percent of the economy, rose at a 2 percent pace, compared with an average 2.8 percent increase per quarter in the six-year expansion that ended in December 2007. Stocks Rise Shares rebounded along with the economy. The Standard & Poor’s 500 Index has climbed 63 percent since reaching a 12-year low on March 9. United Parcel Service is among companies seeing an improvement. Atlanta-based UPS yesterday said first-quarter profit would be “slightly better” than a year ago, signaling that the world’s largest package-delivery company expects a slow start to a recovery that builds through the year. “Economic forecasts indicate gradual improvement as 2010 unfolds,” Kurt Kuehn , UPS’s chief financial officer, said in a statement. “The first quarter will be the most challenging of the year for UPS with profitability only slightly better than last year.” EBay Inc ., the most-visited U.S. e-commerce site, reported Jan. 20 that its profit topped analysts’ estimates, boosted by holiday shopping and the sale of its Skype Internet-calling unit. To contact the reporter on this story: Bob Willis at bwillis@bloomberg.net

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China Imports Set to Surge Record 100%, Boosting Asian Recovery, CICC Says

February 2, 2010

By Bloomberg News Feb. 3 (Bloomberg) — China’s imports may have jumped in January by the most since at least 1991, strengthening Asia’s economic recovery, according to China International Capital Corp. Imports doubled from a year earlier, Beijing-based economist Xing Ziqiang estimated in a report today. That would be the biggest gain since Bloomberg News data started. Exports may have climbed 30 percent, Xing said. Rising commodity prices and strong demand within the world’s third-biggest economy helped to drive the increase, Xing said in an interview. China’s trade numbers are subject to distortions in the first two months of each year because of a Lunar New Year holiday and will benefit in 2010 from comparisons with low levels in 2009. “This is very important for regional growth,” said Xing. “It reflects very strong domestic consumption of durable goods like autos as China imports lots of parts from Japan, Korea and Taiwan.” In January last year, imports slid 43 percent. China is due to release its latest trade figures on Feb. 10. A 4 trillion yuan ($586 billion) stimulus package and record lending last year fueled economic growth of 10.7 percent in the fourth quarter, the fastest pace in two years. China has supplanted the U.S. as the world’s largest auto market for new sales and Germany as the biggest exporting nation. To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net

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U.S. Manufacturing Probably Expanded for Sixth Month, Spearheading Economy

February 1, 2010

By Bob Willis Feb. 1 (Bloomberg) — Manufacturing probably expanded in January for a sixth consecutive month, spearheading the recovery from the worst recession since the 1930s, economists said before a report today. The Institute for Supply Management’s factory index rose to 55.5 from a December reading of 54.9, according to the median forecast of 62 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Other reports may show personal spending rose and construction fell. Factories are stepping up production as stimulus-fueled gains in demand and record cutbacks in inventory boost orders. After the loss of 7.2 million jobs in the last two years, some companies such as Ford Motor Co . are beginning to hire again, laying the groundwork for sustained gains in spending. “With pent-up demand coming forward, factories have to quickly snap back into shape to meet that increased demand,” said Ellen Zentner , a senior economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “We are on the cusp of creating jobs in manufacturing.” The Tempe, Arizona-based purchasing managers’ report is due at 10 a.m. New York time. Survey forecasts ranged from 53.5 to 58. The group issued its annual revisions last week that may not be reflected in this month’s median forecast. The factory index was previously reported at 55.9 for December. Income, Spending Figures from the Commerce Department may show personal spending rose 0.3 percent in December after a 0.5 percent gain the prior month, according to the median estimate of economists surveyed by Bloomberg. Incomes probably increased 0.3 percent, according to the survey median before the 8:30 a.m. release. Government stimulus helped spark rebounds in the housing and automobile industries, two of the most depressed areas during the recession. Factories also benefited from increased orders after companies pared inventories last year by a record $125 billion. Efforts to rebuild depleted stockpiles contributed 3.4 percentage points to a fourth-quarter growth rate of 5.7 percent, the strongest in six years. Employers in January may have added jobs for the second time in three months. Economists surveyed by Bloomberg forecast a 13,000 gain in payrolls last month after a loss of 85,000 in December. The Labor Department will report the figure on Feb. 5. Stock Prices With the economy expanding, the Standard & Poor’s Supercomposite for industrial machinery is up 77 percent since reaching a six-year low on March 9, exceeding the 59 percent gain for the broader S&P 500 Index. Housing, the industry that triggered the recession, is struggling with mounting foreclosures that may push down prices and discourage building. A report from the Commerce Department at 10 a.m. may show construction spending fell 0.5 percent in December, the 14th decline in the last 15 months, according to the median forecast of economists surveyed. Production gains are starting to encourage the hiring needed to ensure the recovery is sustained. Ford said Jan. 26 it will spend about $400 million and add 1,200 jobs at two Chicago plants to build a new, more fuel- efficient Explorer sport-utility vehicle. Caterpillar Inc. , the world’s largest maker of earthmoving equipment, has recalled more than 500 workers and said Jan. 27 that higher production will require “selective” increases in employment. Economies in North America, Europe and Japan are improving and more rapid rebounds are occurring in China and most developing countries, the Peoria, Illinois-based company said. GE Hiring General Electric Co. is hiring workers in energy, health care and rail transportation, in part because governments’ economic-stimulus plans have helped lift demand. GE, whose power-plant equipment generates one-third of the world’s electricity, is bidding to supply new passenger locomotives for Amtrak and in November announced a joint venture in China that would make high-speed rail locomotives that may add 200 U.S. jobs. “We will create jobs in the United States that could not have been created any other way,” John Rice , chief executive officer of GE Technology Infrastructure, said of the rail programs in a Jan. 28 Bloomberg Television interview. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Manufacturing Probably Grew for Sixth Month as Factories Spurred Economy

January 31, 2010

By Bob Willis Feb. 1 (Bloomberg) — Manufacturing probably expanded in January for a sixth consecutive month, spearheading the recovery from the worst recession since the 1930s, economists said before a report today. The Institute for Supply Management’s factory index rose to 55.5 from a December reading of 54.9, according to the median forecast of 62 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Other reports may show personal spending rose and construction fell. Factories are stepping up production as stimulus-fueled gains in demand and record cutbacks in inventory boost orders. After the loss of 7.2 million jobs in the last two years, some companies such as Ford Motor Co . are beginning to hire again, laying the groundwork for sustained gains in spending. “With pent-up demand coming forward, factories have to quickly snap back into shape to meet that increased demand,” said Ellen Zentner , a senior economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “We are on the cusp of creating jobs in manufacturing.” The Tempe, Arizona-based purchasing managers’ report is due at 10 a.m. New York time. Survey forecasts ranged from 53.5 to 58. The group issued its annual revisions last week that may not be reflected in this month’s median forecast. The factory index was previously reported at 55.9 for December. Income, Spending Figures from the Commerce Department may show personal spending rose 0.3 percent in December after a 0.5 percent gain the prior month, according to the median estimate of economists surveyed by Bloomberg. Incomes probably increased 0.3 percent, according to the survey median before the 8:30 a.m. release. Government stimulus helped spark rebounds in the housing and automobile industries, two of the most depressed areas during the recession. Factories also benefited from increased orders after companies pared inventories last year by a record $125 billion. Efforts to rebuild depleted stockpiles contributed 3.4 percentage points to a fourth-quarter growth rate of 5.7 percent, the strongest in six years. Employers in January may have added jobs for the second time in three months. Economists surveyed by Bloomberg forecast a 13,000 gain in payrolls last month after a loss of 85,000 in December. The Labor Department will report the figure on Feb. 5. Stock Prices With the economy expanding, the Standard & Poor’s Supercomposite for industrial machinery is up 77 percent since reaching a six-year low on March 9, exceeding the 59 percent gain for the broader S&P 500 Index. Housing, the industry that triggered the recession, is struggling with mounting foreclosures that may push down prices and discourage building. A report from the Commerce Department at 10 a.m. may show construction spending fell 0.5 percent in December, the 14th decline in the last 15 months, according to the median forecast of economists surveyed. Production gains are starting to encourage the hiring needed to ensure the recovery is sustained. Ford said Jan. 26 it will spend about $400 million and add 1,200 jobs at two Chicago plants to build a new, more fuel- efficient Explorer sport-utility vehicle. Caterpillar Inc. , the world’s largest maker of earthmoving equipment, has recalled more than 500 workers and said Jan. 27 that higher production will require “selective” increases in employment. Economies in North America, Europe and Japan are improving and more rapid rebounds are occurring in China and most developing countries, the Peoria, Illinois-based company said. GE Hiring General Electric Co. is hiring workers in energy, health care and rail transportation, in part because governments’ economic-stimulus plans have helped lift demand. GE, whose power-plant equipment generates one-third of the world’s electricity, is bidding to supply new passenger locomotives for Amtrak and in November announced a joint venture in China that would make high-speed rail locomotives that may add 200 U.S. jobs. “We will create jobs in the United States that could not have been created any other way,” John Rice , chief executive officer of GE Technology Infrastructure, said of the rail programs in a Jan. 28 Bloomberg Television interview. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Hamptons Home Sales Increase 59% as Buyers Seek Bargains in Luxury Market

January 28, 2010

By Oshrat Carmiel and Prashant Gopal Jan. 28 (Bloomberg) — Home sales in the Hamptons, the New York vacation getaway for dealmaker Stephen Schwarzman and movie star Sarah Jessica Parker, surged 59 percent in the fourth quarter as two years of declining prices lured buyers. Transactions climbed to 409 from 257 a year earlier, the biggest increase in seven years of recordkeeping, New York-based appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today. Competition for properties pushed the median price up 4.9 percent to $917,900, the first year-over-year gain since the beginning of 2008. “This is all very good news, better than expected, but I still think we’re not through this yet,” Miller Samuel President Jonathan Miller said in an interview. “The surge in activity to more normal levels, a large portion of that is a release of pent-up demand.” The median Hamptons home price dropped 31 percent since 2007 as financial firms recorded $1.74 trillion in global losses and asset writedowns tied to sour U.S. home loans. Wall Street executives drive Hampton’s property sales. Part-time residents have included Schwarzman, chairman and chief executive officer of the Blackstone Group LP and billionaire Ronald Perelman. Hamptons sales slumped in 2008 and the beginning of 2009 as the financial industry cut 26,300 New York City jobs in 12 months, the state Labor Department said Jan. 21. New York City’s unemployment rate jumped to 10.6 percent in December, the highest level since 1993. “We have two macro issues, unemployment and credit, that are not expected to change significantly in 2010 from where we are now,” Miller said. “It’s more the second half of the year that I’m concerned about.” Price Cuts Hamptons home sellers cut an average of 14 percent from their asking prices to attract buyers in the fourth quarter, compared with discounts of 16 percent a year earlier, Miller said. Peter and Annette Smergut found a buyer for their East Hampton ranch-style house after agreeing to sell it for $815,000, a 19 percent discount from their original asking price. The 1,800 square-foot home includes a pool, pond and private beach access. The sellers got a deal of their own, purchasing a new place in East Hampton for $715,000, 28 percent less than the asking price 10 months earlier, said Peter Smergut. “It was a hit for us and a hit for them,” he said. Two other real estate brokers issued Hamptons sales reports this month. The Corcoran Group , based in Manhattan, said annual home sales tumbled 22 percent in 2009 and the median price dropped 4 percent to $830,000. Broker Views Town & Country Real Estate said the median price across 11 towns and villages that comprise the Hamptons fell 2.5 percent to $905,000 in 2009, while the number of properties changing hands climbed 4.9 percent to 1,045. Each brokerage report draws data from different sources. “The fourth quarter was the saving grace for all of 2009,” said Judi Desiderio , president and chief executive officer of Town & Country Real Estate . Luxury sales throughout the Hamptons and Long Island’s North Fork climbed to 55 properties, a 53 percent increase in the fourth quarter from a year earlier, according to Miller Samuel and Prudential Douglas Elliman. The median luxury price dropped 3.4 percent to $4.5 million. Miller defines the luxury market as the top 10 percent of sales, which in the fourth quarter included properties sold for $3 million or more. High-end sellers cut their price by an average of 17 percent compared with 9 percent a year earlier, Miller said. To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net ; Prashant Gopal in New York at Pgopal2@bloomberg.net

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Nucor Passes U.S. Steel as Top American Steelmaker by Sales Amid Recession

January 26, 2010

By Edmond Lococo Jan. 26 (Bloomberg) — Nucor Corp. returned to profit after three straight quarterly losses and moved past U.S. Steel Corp. as the largest American steelmaker by value of 2009 sales. The global recession cut revenue at each company by about 53 percent last year. Nucor today said 2009 sales fell to $11.2 billion, from $23.7 billion, while U.S. Steel sales dropped to $11 billion from $23.8 billion as it posted a fourth straight quarterly loss. It’s the first time since at least 1990 that Nucor sales topped U.S. Steel’s, according to Bloomberg data. The U.S. industry ran at an average 51 percent of capacity last year as the recession cut demand for the metal used in cars, construction and appliances. Prices dropped to a five-year low in June. Capacity averaged 54 percent at Nucor and 48 percent at U.S. Steel excluding its European operations, the companies said today. “We do not expect U.S. capacity utilization in the steel sector to increase much above the 60 percent to 65 percent level in 2010,” Michael Willemse , a Toronto-based analyst at CIBC World Markets, wrote in a report today. U.S. Steel predicted another loss for the current quarter, and its shares fell $5.23, or 9.3 percent, to $515 at 10:44 a.m. in New York Stock Exchange composite trading . Nucor , which said first-quarter earnings will be hurt by an inventory valuation adjustment, declined 40 cents to $43.73. Earnings Results Nucor’s fourth-quarter net income fell to $58.9 million, or 18 cents a share, from $105.9 million, or 34 cents, a year earlier, the Charlotte, North Carolina-based company said today in a statement. Sales dropped 29 percent to $2.94 billion. Fourth-quarter profit excluding some one-time items was 19 cents a share. The average estimate was 7 cents a share in a Bloomberg survey of 14 analysts. U.S. Steel’s fourth-quarter net loss of $267 million, or $1.86 a share, compared with net income of $290 million, or $2.50, a year earlier, the Pittsburgh-based company said today in a statement. Sales dropped 25 percent to $3.35 billion. Excluding certain one-time items, the loss was $1.84 a share. U.S. Steel was projected to report a fourth-quarter loss excluding some items of $1.51 a share, the average estimate of 13 analysts surveyed by Bloomberg. To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net

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Asian Stocks Fall as China Tightening Concerns Deepen; Yen, Dollar Advance

January 25, 2010

By Darren Boey and Kana Nishizawa Jan. 26 (Bloomberg) — Asian stocks declined, while the yen and the dollar strengthened against the euro as concerns deepened China will step up measures to slow the world’s fastest-growing major economy. Treasuries extended gains. The MSCI Asia Pacific Index fell 1.3 percent to 119.92 as of 1:55 p.m. in Tokyo, the lowest since Dec. 30. The Hang Seng Index lost 1.6 percent to 20,269.14, extending its drop from a November high to 12 percent. Standard & Poor 500 Index futures slid 0.9 percent. The yen strengthened to 126.99 per euro from 127.75 in New York yesterday. The dollar advanced to $1.4122 per euro from $1.4151. Concerns about tighter monetary policy in China have dragged the MSCI World Index down for the past five days. Goldman Sachs Group Inc. downgraded Chinese banks today, while Reuters reported that several China lenders will see an additional increase in their reserve ratios take effect. “The market is having trouble rebounding from its slump because of all the uncertainties,” said Koji Toda , chief fund manager at Resona Bank Ltd., which holds about $55 billion. “People are still worried, and yet clinging to the hope that policy support will continue to drive the global recovery.” The Nikkei 225 Stock Average fell 1.1 percent in Japan, where the central bank held interest rates near zero and said it remains committed to fighting deflation. South Korea’s Kospi Index dropped 1.9 percent, while Taiwan’s Taiex Index sank 2.9 percent. Bank Of China Ltd. , the nation’s third-largest lender, declined 2.4 percent to HK$3.72 and Bank of Communications Co. fell 3.4 percent to HK$7.90. Bank of China was cut to “neutral” from “buy,” while BoCom was cut to “sell” from “neutral” at Goldman Sachs. China Bank Downgrades “This potential collateral damage due to policy tightening or GDP slowdown is perhaps the hardest to assess, capping valuations until these overhangs are resolved,” Goldman Sachs analysts led by Ning Ma said in a report today. China is starting to take steps to cool the economy, which grew in the fourth quarter at the fastest pace since 2007. Gross domestic product expanded 10.7 percent while consumer prices rose a higher-than-estimated 1.9 percent in December from a year earlier, according to government data on Jan. 21. Banks have suspended new lending since Jan. 19 across the country, Dong Tao , a Hong Kong-based economist at Credit Suisse Group AG, wrote in a note to clients. The central bank raised the proportion of deposits banks must set aside as reserves on Jan. 12. Several Chinese lenders will see an additional increase in their reserve ratios take effect today, Reuters reported, citing banking sources it didn’t identify. China Interbank Rate Foxconn International Holdings Ltd. , which makes mobile phones, fell 9 percent to HK$8.05 in Hong Kong after saying it expects a “significant” decline in profit for 2009. China’s seven-day repurchase rate, which measures the cost of borrowing money in the country’s interbank market, climbed 30 basis points to 1.64 percent, the biggest increase in a month. Japan’s currency strengthened versus all 16 of its major counterparts. The yen appreciated to 90.02 per dollar from 90.28 in New York yesterday. “The market remains very sensitive to signs of China’s tightening, which revive risk aversion and cause the yen to be bought back,” said Masato Mori , senior manager of the business and marketing department at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “This is part of the Chinese government’s efforts to keep the economy from overheating while securing growth.” The benchmark 10-year note yield fell four basis points to 3.60 percent, according to BG Cantor Market Data. The 3.375 percent security due November 2019 rose 9/32, or $2.81 per $1,000 face amount to 98 6/32. Commodity Prices Commodity prices fell as concerns about tightening in China raised concern raw-materials demand will drop. Copper declined in London for the first time in three days, dropping 1 percent to $7,390 a metric ton. Aluminum fell 0.4 percent to $2,233.75 a ton, nickel declined 0.9 percent to $18,000 and lead lost 0.5 percent to $2,209. Crude oil declined 1 percent to $74.52 a barrel in New York after-hours trading. “China tightening their monetary policy is sending a signal,” said Clarence Chu , a trader with options dealers Hudson Capital Energy in Singapore. “Demand is growing, but not as fast as previously expected.” The cost of protecting Asian bonds from non-payment increased, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 4 basis points to 105 basis points as of 8:18 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The risk benchmark is on track for its highest close since it climbed to 108 basis points on Jan. 22, according to CMA DataVision prices in New York. To contact the reporter for this story: Darren Boey in Hong Kong at dboey@bloomberg.net .

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Asian Stocks Fall for Sixth Day on Obama Plan to Curb Banks; Yen Weakens

January 25, 2010

By Will McSheehy Jan. 25 (Bloomberg) — Asian stocks fell for a sixth day on concern about Barack Obama’s plan to curb U.S. banks. The dollar and yen weakened amid expectations Federal Reserve Chairman Ben. S. Bernanke will win a second term. The MSCI Asia Pacific Index lost 0.6 percent to 121.65 as of 2:25 p.m. in Tokyo. Japan’s Nikkei 225 Stock Average sank 0.4 percent while the yen dropped against all of its 16 most-traded counterparts. Futures on the U.S. Standard & Poor’s 500 Index climbed 0.5 percent and the dollar traded at $1.4161 per euro from $1.4139 on Friday. “Asian markets are correcting over concerns the trajectory of growth is insufficient to justify some valuations,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “The change to U.S. banking regulations will severely hamper the ability of many banks to meet forecast profit growth, particularly those banks with large proprietary trading and hedge fund exposures.” Investors in Asia reacted to Obama’s plan to limit the size and trading activities of financial institutions in a bid to reduce risk taking, calling into question stock valuations. The extra yield investors demand to own company bonds instead of government debt widened for the first time since the five days ended Nov. 27, based on Bank of America Merrill Lynch’s Global Broad Market Corporate Index. Bernanke Support Senate Republican leader Mitch McConnell said he expects Bernanke will win a second term, indicating enough Republicans will join Democrats in backing the central banker’s policies to spur recovery in the world’s biggest economy. Fed officials will keep interest rates near zero after their two-day meeting this week, economists forecast in a Bloomberg survey. Seven stocks fell for every two that rose on the MSCI Asia index. Most Chinese banks fell after Bank of China Ltd., the nation’s third-largest lender by market value, proposed to issue as much as 40 billion yuan ($5.86 billion) of bonds convertible into new shares to raise capital. JPMorgan Chase & Co. lowered its allocation for China’s banking stocks in its model portfolio, saying they may be hurt in the “short term” by fundraising activities and the possible sale of Industrial & Commercial Bank of China Ltd. shares by Goldman Sachs Group Inc. Bank of Communications Co. dropped 2.9 percent. Industrial & Commerical lost 0.8 percent “The size of Bank of China’s fundraising is huge,” Li Jun , a strategist at Central China Securities Holdings Co., said in Shanghai. “I’m afraid more big banks will follow suit in order to boost their capital adequacy ratio, which will be negative for the market.” Share Sale Woori Finance Holdings Co. fell 3.9 percent on concern South Korea may sell more stock. The government is preparing for another block sale of shares in the country’s third-biggest bank, four people familiar with the plan said last week. The yen fell to 127.64 per euro in Tokyo from 126.98 in New York on Jan 22. The dollar declined against higher-yielding currencies before a report today that economists said will show sales of existing U.S. homes fell in December, backing the case for the Fed to keep interest rates between zero and 0.25 percent. Copper for three-month delivery dropped 0.6 percent to $7,346.25 a metric ton on the London Metal Exchange after declining as much as 1 percent. Zinc gained 0.6 percent, snapping three days of losses. ‘Material Recovery’ Crude oil traded little changed near a one-month low as sliding equity markets and expectations of interest-rate increases in China dented investor confidence in the strength of the global economic recovery. Oil for March delivery earlier fell as much as 43 cents, or 0.6 percent, to $74.11 a barrel on the New York Mercantile Exchange, having traded at $74.54 a barrel on Jan. 22, the lowest settlement since Dec. 22. “We’ve seen a pretty significant turn in macro sentiment,” said Toby Hassall , a commodity analyst at CWA Global Markets Pty. in Sydney. Oil “was very much a forward- looking market last year pricing in a recovery. We’ve seen some encouraging signs, and the U.S. certainly is looking a lot better than it was 12 months ago, but that’s a different thing to a material recovery.” Bond risk climbed in Asia, according to traders of credit- default swaps. The Markit Asia index of 50 investment-grade borrowers outside Japan rose 4 basis points to 110.5 basis points at 9:03 a.m. in Singapore, Deutsche Bank AG prices show. The risk benchmark is at its highest since Dec. 1, according to CMA DataVision in New York, and is on course to climb for a sixth consecutive day, the longest stretch in more than 11 months. To contact the reporter for this story: Will McSheehy in Singapore at wmcsheehy@bloomberg.net

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Housing Starts in U.S. Probably Stalled After Bad Weather, Foreclosures

January 20, 2010

By Bob Willis Jan. 20 (Bloomberg) — Housing starts were probably little changed in December as rising foreclosures and inclement weather kept builders at bay, economists said before a report today. Ground may have been broken on 572,000 houses at an annual rate compared with 574,000 in November, according to the median estimate of 70 economists surveyed by Bloomberg News. Permits, a sign of future construction, may also have dropped. A projected record 3 million foreclosures this year will probably swell the number of properties on the market, hurting builders by making existing houses more attractive as prices fall. At the same time, the government’s extension and expansion of the tax credit for first-time buyers will probably help underpin demand in the first half of the year. “There is risk of a further decline in housing coming from the dynamic of elevated foreclosures,” said Julia Coronado , a senior economist at BNP Paribas in New York. “Like the rest of the economy, there are a lot of speed bumps in the road.” The Commerce Department’s report is due at 8:30 a.m. in Washington. Projections ranged from 495,000 to 630,000. The housing report may also show building permits fell 1.5 percent to a 580,000 annual pace, according to the survey. A report at the same time from the Labor Department may confirm inflation slowed in December. Wholesale costs were unchanged last month after jumping 1.8 percent in November, according to the survey median. Excluding food and energy, the producer-price index may have climbed 0.1 percent following a 0.5 percent November increase. Projected Foreclosures Rising foreclosures are adding to inventory and may discourage builders. A record 3 million U.S. homes will be repossessed by lenders this year as high unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast on Jan. 14. Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005. Builder shares lagged the Standard & Poor’s 500 Index last year. The S&P Supercomposite Homebuilding Index gained 18 percent in 2009 compared with a 23 percent rise in the S&P 500. President Barack Obama on Nov. 6 extended an $8,000 first- time buyer credit that was due to expire at the end of the month and expanded it to include current homeowners. The extension covers closings through June as long as contracts are signed by the end of April. Still, the measure pull sales forward, depressing demand in the second half of the year. Sales of new houses dropped 11 percent in November, the month the government’s tax credit was due to expire. A jump in purchases of existing homes pushed total sales up to a 6.895 million annual pace, the most since March 2007. Bad Weather Weather may have also played a role in depressing December housing starts, economists said. Last month was the 14th coldest December and 11th wettest in 115 years of record keeping, according to the National Climatic Data Center, in Asheville, North Carolina. The Southeast, which makes up part of the biggest of four regions for starts, experienced the wettest December ever. While housing starts have climbed since reaching a record low in April, they were still 75 percent below their peak of 2.27 million, at an annual rate, reached in January 2006. Confidence among U.S. homebuilders unexpectedly dropped in January to the lowest level since June, the National Association of Home Builders/Wells Fargo said yesterday. Job Losses Any sustained recovery will require gains in employment, economists said. The U.S. has lost 7.2 million jobs since the recession began, and economists surveyed by Bloomberg early this month forecast joblessness will average 10 percent this year. KB Home , the Los Angeles-based homebuilder that sells to first-time buyers, is among homebuilders struggling. The company last week reported a pretax loss of $91 million on declining revenue for the fiscal fourth quarter that ended Nov. 30. KB Home’s orders rose 12 percent to 1,446 from 1,296 in the year-earlier quarter, while completed sales dropped 22 percent to 3,042, according to the report. The average price declined 12 percent to $203,400. KB Home is “not going to make money in the first quarter” and plans to “restore profitability” in the second half of 2010, Chief Executive Officer Jeffrey Mezger said Jan. 12 in a conference call with analysts and investors. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

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Oil, Copper Climb on Outlook for Increasing Demand; Stocks, Pound Advance

January 18, 2010

By Michael Patterson and David Merritt Jan. 18 (Bloomberg) — Oil rose for the first time in six days, driving shares in Canada and emerging markets higher, on speculation demand will rebound this year as the global economy recovers. The pound strengthened after a survey showed U.K. house prices increased. Crude oil advanced 0.9 percent to $78.68 a barrel in New York, while copper added 1.4 percent. Canada’s Standard & Poor’s/TSX Composite Index increased 0.4 percent, while Russia’s Micex Index rose to a 17-month high. U.S. markets are closed today for the Martin Luther King Jr . holiday. China’s crude oil imports may increase 15 percent this year as the world’s second-biggest energy consumer starts building the next phase of its strategic oil reserves, China Oil, Gas & Petrochemicals forecast. International Monetary Fund Managing Director Dominique Strauss-Kahn said in Tokyo it’s too early for policy makers to withdraw stimulus packages that are resuscitating global growth. “Cyclical trends remain supportive for commodities as an asset class,” Dmitriy Kolomytsyn , a Morgan Stanley analyst in Moscow, wrote in a report today. He raised price estimates for Russian metals and mining stocks by 28 percent on average. Europe’s Dow Jones Stoxx 600 Index advanced 0.7 percent as the gains in metals prices boosted the earnings outlook for basic-resource producers. The gauge pared some of its gains after International Power Plc said it hadn’t reached an agreement with GDF Suez SA on an industrial tie up. Oil Demand Crude oil for February delivery rose as much as 68 cents in electronic trading on the New York Mercantile Exchange. China’s crude oil storage capacity will reach 44.6 million cubic meters by 2011, the fortnightly newsletter published by the official Xinhua News Agency said. The Micex index advanced 1.9 percent as Morgan Stanley upgraded commodity producers and UBS AG said the rally in world’s best-performing equity market in 2009 has more to go. Brazil’s Bovespa index added 0.7 percent, while the S&P/TSX Composite Index increased for the first time in three days as Petroleo Brasileiro SA and EnCana Corp. climbed. Greece’s Athens Stock Exchange General Index sank 2.5 percent as European finance ministers scrutinized plans to curb the nation’s budget deficit. Alpha Bank SA, the nation’s third- largest bank, slipped 7.7 percent in Athens. Hellenic Telecommunications Organization SA, Greece’s biggest telephone- services provider, slid 2.5 percent. Greek Deficit Greece is struggling to cut a 2009 budget deficit that may reach 12.7 percent of gross domestic product, the highest in the euro region. Moody’s Investors Service said on Jan. 13 the Greek and Portuguese economies may face a “slow death” as they dedicate a higher proportion of their wealth to paying off debt. The euro fell to near its lowest level in a week against the dollar, losing as much as 0.4 percent to $1.4335, almost matching its weakest level since Jan. 8. It recently traded at $1.4375. “If the EU decides to bail out Greece, either via the European Central Bank or direct by other euro members, it would deliver a bad signal to other euro-zone countries,” Jennifer Underwood , a strategist at Europe Arab Bank Plc in London, wrote in a note. “Should no bailout be forthcoming and there is a Greek sovereign default, not only would the euro come under some heavy pressure on the foreign-exchange markets, the weaker euro members would come under attack.” The pound advanced against 14 of its 16 most-traded counterparts, and traded at less than 88 pence per euro for the first time since Sept. 15, after a survey showed U.K. house prices increased in January. Asian Shares Fall The yield premium , or spread, investors demand to hold Greek 10-year bonds rather than those of Germany, Europe’s benchmark borrower, narrowed 4 basis points to 269 basis points, after earlier jumping to 278 basis points, within 1 basis point of the widest level since March. The corresponding spread for Portuguese 10-year notes widened 2 basis points to 94. The gap for Spanish debt increased by 3 basis points to 73. A basis point equals 0.01 percentage point. The MSCI Asia Pacific Index dropped 0.4 percent, snapping four weeks of gains, after JPMorgan Chase & Co. reported a loss in retail banking after Asian markets closed on Friday and U.S. consumer confidence trailed forecasts. Nissan Motor Co., which gets about 35 percent of its sales from North America, slumped 2.6 percent in Tokyo. China Mobile Ltd. declined 2.5 percent in Hong Kong, leading declines by telecommunications stocks. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net .

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Google Says It’s Holding Talks With China Amid Dispute Over Cyber Attacks

January 18, 2010

By Mark Lee Jan. 18 (Bloomberg) — Google Inc. said it has begun talks with the Chinese government about the company’s plan to stop censoring results from its search engine, after saying it may quit the country because of cyber attacks. Google will hold more talks with Chinese authorities “in the coming days,” it said in an e-mailed statement today. The operator of the world’s most-popular search engine last week said it plans to operate an unfiltered search-engine service in China — a move that may lead to the company closing down its offices in the country — pending talks with the government. The Mountain View, California-based Internet company said its computer system faced a series of “highly sophisticated” attacks that originated in China. “The key swing factor is the negotiation between Google and the Chinese government,” Credit Suisse Group AG analysts Wallace Cheung and Sharon Jing wrote in a report today. “Next week will be crucial for resolution of the issue,” said the analysts. An exit from China would leave Google, whose revenue growth slowed during the U.S. recession, on the sidelines of the world’s biggest Internet market by users. The number of Chinese Web users will grow to 840 million, or 61 percent of the population, by 2013, according to EMarketer Inc. in New York. That’s up from 396 million last year. Blog Posting Google said Jan. 12 in a blog posting that it had been subjected to cyber attacks that originated from China and had targeted Chinese human rights campaigners’ Gmail e-mail accounts. It wanted to reach an agreement with the Chinese government to allow unfiltered Internet searches, and would be removing restrictions in coming weeks, the company added. China said it welcomed global Internet companies provided they obey laws that restrict their content. The Chinese service started by Google in 2006 limits search results to comply with the Chinese government’s rules to restrict access to information censors deem inappropriate. Its Google.cn Chinese-language site is still operating in compliance with local regulations, Google said in today’s statement. Local online operator Baidu Inc. will pick up “the lion’s share” of Google’s search business should the U.S. company leave, Nomura Holdings Inc. analyst Jin Yoon wrote in a Jan. 13 report. Tencent Holdings Ltd., operator of China’s biggest online chat service, and Sohu.com Inc. also will gain, Yoon said. Google’s China operations may be “officially terminated” in February, leading the government to block the company’s main site, Credit Suisse’s Cheung and Jing wrote. “Post Google’s China shut down, China government is likely to frequently block the Google.com Web site,” they wrote, without saying who gave them the information. “Without stable Web site access, Google will likely lose traffic and even revenue” to Baidu and other search-engine providers. To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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Americans Oppose Measures Limiting 401(k) Choices, Investment Group Says

January 8, 2010

By Jeff Plungis Jan. 8 (Bloomberg) — U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said. Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing lifetime payments, according to an institute-funded report today. The Washington-based institute represents the mutual-fund industry. “People value the tool of the 401(k),” Paul Schott Stevens , chief executive officer of the institute, said at a news conference in Washington. “They do not want government to take it away from them. They think the structure works very effectively.” Lawmakers have proposed changes, and the Obama administration will seek ways to promote conversion of 401(k) accounts after their average value fell in the past three years alongside a 46 percent drop in the Standard & Poor’s 500 Index. The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry , who are leading the effort. Tax Benefits The institute’s member companies manage $11.6 trillion of assets in mutual funds, including employer-sponsored 401(k) accounts. Some lawmakers have questioned the public-policy value of the tax benefits for people investing in retirement accounts, the ICI said in a report today. U.S. direct-contribution plans, which include 401(k) and other employer-sponsored retirement programs, held about $3.6 trillion as of mid-2009, according to the report. They account for 25 percent of total U.S. retirement assets. Annuities, with $1.4 trillion, represent about 10 percent of U.S. retirement funds. The average 401(k) fund balance dropped 31 percent to $47,500 at the end of March 2009 from $69,200 at the end of 2007, according to a Fidelity Investments review of 11 million accounts it manages. The average balance of the Fidelity accounts recovered to $60,700 as of last Sept. 30 as the stock market rebounded. Standing Firm Few Americans are giving up on their 401(k) plans, John J. Brennan , former chairman of the Vanguard Group, said at the news conference. From January to September of last year, 5 percent of participants stopped contributing, compared with 3.7 percent for all of 2008, Brennan said. The portion who changed their allocations was 9.9 percent. “Savers are sticking with 401(k) plans,” said Brennan, who serves as a senior adviser for the Valley Forge, Pennsylvania-based mutual fund firm. “There’s been no panic. It’s a different story than we would have seen 25 years ago.” Senator Herb Kohl , chairman of the Senate Special Committee on Aging, proposed legislation on Dec. 16 to require fund companies to do more to ensure 401(k) options are appropriate for workers. The Wisconsin Democrat cited reports that target- date funds designed for people retiring in 2010 invested in high-yield, high-risk corporate bonds. Representative George Miller , a California Democrat, is advocating legislation to require more disclosure about 401(k) fees paid by investors. The Education and Labor Committee, which Miller leads, approved a bill requiring more disclosure about fees in June. The ICI survey was based on a telephone survey of 3,000 households from Nov. 20 to Dec. 20 and had a sampling error of plus or minus 1.8 percent. To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net .

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Pending Home Sales in U.S. Probably Declined for First Time in 10 Months

January 5, 2010

By Bob Willis Jan. 5 (Bloomberg) — The number of contracts to buy previously owned U.S. homes probably fell in November for the first time in 10 months as Americans waited for a tax credit to be extended, economists said before a report today. The index of signed purchase agreements, or pending home sales, dropped 2 percent after October’s 3.7 percent increase, according to the median estimate in a Bloomberg News survey of 35 economists before today’s release from the National Association of Realtors. Factory orders rose for a third straight month in November, a separate report from the Commerce Department may show. The incentive for first-time homebuyers, originally scheduled to expire at the end of the month and subsequently extended through April and broadened, is stabilizing sales. The credit and cheaper properties are helping sustain the recovery in housing that’s emerged from the worst slump since the 1930s. “Buyers wouldn’t have expected to close in time to take advantage of the credit,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Sales will improve again as we move through the first part of the year, as buyers take advantage of the tax credit and improved affordability. The underlying trend is one of improvement.” The National Association of Realtors is due to report the figures at 10 a.m. in Washington today. Estimates range from a drop of 12 percent to a 3.9 percent increase. The Commerce Department report at the same time may show orders placed with U.S. factories rose 0.5 percent in November after a 0.6 percent rise, according to the median estimate of 58 economists surveyed by Bloomberg. Leading Indicator Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later. The Realtors group started publishing the index in March 2005, and data go back to January 2001. Transactions had to close by Nov. 30 for buyers to qualify for the tax credit, which explains why resales continued to rise through November. The extension allows closings to occur by the end of June as long as contracts are signed by the end of April. Sales of existing homes in November rose 7.4 percent to a 6.54 million annual rate, the highest level in almost three years, the National Association of Realtors said on Dec. 22. Foreclosures accounted for 33 percent of all sales, the group said. President Barack Obama on Nov. 6 extended the $8,000 first- time buyer credit and expanded it to include current homeowners in a bid to boost demand. Still, the measure may have pulled sales forward and could result in fewer purchases in coming months. Home Prices The recession has helped make homes more affordable. The S&P/Case-Shiller index of average home prices in 20 U.S. cities was down 29 percent in October from its peak in July 2006. The measure fell 7.3 percent from October 2008. Federal Reserve officials are doing their part to sustain the housing rebound by pledging to keep their benchmark interest rate near zero for an “extended period,” according to their latest policy statement. Even so, mortgage rates have begun rising. The average rate on a 30-year fixed home loans rose to 5.14 percent for the week ended Dec. 31, the fourth consecutive gain after reaching a record low of 4.71 percent in the week ended Dec. 3, according to mortgage finance company Freddie Mac. Builders are still struggling even as many forecast a rebound this year. Hovnanian Enterprises Inc ., New Jersey’s largest homebuilder, said Dec. 16 its fourth-quarter loss narrowed as more buyers signed purchase contracts. ‘Year of Transition’ “2010 will be a year of transition for us,” Chief Executive Officer Ara Hovnanian said on a conference call. “We have started down a path that we believe will eventually return us to profitability.” Stocks of homebuilders surged last year as the economy recovered from the worst recession in seven decades. The Standard & Poor’s Homebuilder Supercomposite Index gained 66 percent from March 9 through the end of 2009. The S&P 500 Index rose 65 percent since reaching a 12-year low that day. An absence of job gains remains a hurdle for housing. The economy has lost 7.2 million jobs since the recession began in December 2007. The unemployment rate may exceed 10 percent through the first half of 2010, a Bloomberg survey showed. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

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Manufacturing in U.S. Probably Grew at Faster Pace in Capping 2009 Rebound

January 4, 2010

By Bob Willis Jan. 4 (Bloomberg) — Manufacturing probably expanded at a faster pace in December, capping a 2009 rebound that helped pull the U.S. out of the worst recession since the 1930s, economists said before a report today. The Institute for Supply Management’s factory index rose to 54 from 53.6 in November, according to the median forecast of 57 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Factories may keep ramping up production as a record reduction in inventories and a stimulus-driven rebound in global demand boost orders. After cutting payrolls by 4.1 million workers in the first 11 months of last year, employers such as Caterpillar Inc. may need to bring back staff, giving incomes a boost and fueling a self-sustaining recovery in 2010. “A lot of activity put on the back burner during the recession is now coming back as people aren’t worried the sky will fall,” said Stephen Stanley , chief economist at RBS Securities Inc. in Stamford, Connecticut. “We should be seeing a strong growth bounce.” The Tempe, Arizona-based purchasing managers’ report is due at 10 a.m. New York time. Survey forecasts ranged from 52 to 56. The ISM index would be up 21 points from a 28-year low of 32.9 reached in December 2008, after the collapse of Lehman Brothers Holdings Inc. caused credit markets to freeze. The advance would be the biggest annual gain since 1983. Homes and Autos Government-assisted rebounds in the housing and automobile industries, two of the most depressed areas during the recession, contributed to the initial burst of activity that has since been sustained. Economic growth may be helped in coming months by the need to replenish depleted stockpiles. Employers last month probably cut the fewest jobs since the recession began in December 2007. Economists surveyed by Bloomberg forecast a 1,000 decline in payrolls in December after a loss of 11,000 the previous month. The Labor Department will report the figure on Jan. 8. Also at 10 a.m. today, a Commerce Department report may show spending on construction projects fell 0.5 in November after no change the prior month, according to the survey median. The Standard & Poor’s Supercomposite for industrial machinery is up 86 percent since reaching a six-year low on March 9, exceeding the 65 percent gain for the broader S&P 500 Index. Regional Manufacturing Data Recent manufacturing data have shown improvement. The Institute for Supply Management-Chicago Inc.’s business barometer rose in December to 58.7, the highest level since May 2007, the group said last week. Gains in new orders and backlogs signaled the recovery will persist. The Fed Bank of Philadelphia’s index of manufacturing in the region increased in December to the highest level since April 2005. The world’s largest economy expanded at a 2.2 percent pace from July through September after a yearlong contraction that was the worst since the 1930s, figures from the Commerce Department showed last month. Economists surveyed by Bloomberg forecast growth to pick up to a 3 percent pace in the fourth quarter and average 2.6 percent for all of 2010. As the global economy rebounded, exports rose for the sixth consecutive month in October. A 13 percent drop in the dollar since March 5 against a basket of six major currencies also makes American goods more competitive to overseas buyers. Inventories Rise Inventories at U.S. companies rose in October for the first time since August 2008, the Commerce Department said Dec. 11, a sign firms are boosting production to keep pace with rising sales. With orders rising, manufacturers are poised to hire. Caterpillar, the world’s largest maker of bulldozers and excavators, will bring back some laid-off workers this year as sales improve, said Chief Executive Officer Jim Owens . “We’ll gradually begin to call people back and to rebuild our overall sales and ability to ship product,” Owens said in a Dec. 11 interview with Bloomberg Television. “I think it will gradually begin to pick up as 2010 unfolds.” Caterpillar cut about 18,700 full-time jobs and about the same number of temporary workers since December 2008 as the global recession reduced demand. The Peoria, Illinois-based company predicts 2010 sales will increase as much as 25 percent from the midpoint of the 2009 forecast range. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Treasuries Are Little Changed After $32 Billion Sale of Seven-Year Notes

December 30, 2009

By Daniel Kruger Dec. 30 (Bloomberg) — Treasuries were little changed after the government sold $32 billion of seven-year debt, the last of three note sales this week totaling a record-tying $118 billion. The securities drew a yield of 3.345 percent, compared with an average forecast of 3.372 percent in a Bloomberg News survey of four of the Federal Reserve’s 18 primary dealers. The bid-to- cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.72. The average ratio at the last 10 auctions was 2.56. “The back-up in yields makes them moderately more attractive,” Christian Cooper , an interest-rate strategist at Royal Bank of Canada’s RBC Capital Markets in New York, said before the auction. The firm is one of 18 primary dealers that trade with the Federal Reserve and are obligated to bid in Treasury auctions. “It feels like that is the tone.” The yield on the current seven-year note fell one basis point, or 0.01 percentage point, to 3.30 percent at 1:03 p.m. in New York, according to BGCantor Market Data. The last auction of seven-year debt, a $32 billion offering in November, drew a yield of 2.835 percent, the lowest since April. The bid -to-cover ratio was 2.76. Indirect bidders, a class of investors that includes foreign central banks, purchased 44.7 percent of the notes today. At the November sale, they bought 62.5 percent, compared with an average for the past 10 sales of 50.7 percent. Treasuries earlier were little changed. They have fallen 3.6 percent this year, according to Bank of America Merrill Lynch indexes, as the U.S. stepped up debt sales to help spur growth in an economy recovering from its deepest recession in six decades. Unprecedented Amounts President Barack Obama is borrowing unprecedented amounts for spending programs. U.S. marketable debt increased to a record $7.17 trillion in November from $5.80 trillion at the end of last year. The U.S. sold $42 billion of five-year securities yesterday and $44 billion in two-year notes on Dec. 28. Today’s auction was “the last hoop the market has to jump through in 2009,” said James Collins , an interest-rate strategist in the futures group in Chicago at Citigroup Inc., one of 18 primary dealers that trade with the Fed and are obliged to participate in Treasury auctions. “Yields have been trending higher. It’s been a response to increased supply.” Holders of U.S. debt have made a return of 81 percent over the past decade, according to the Bank of America Merrill Lynch indexes. That compares with an 8 percent loss for the Standard & Poor’s 500 Total Return Index . Yield Curve The so-called Treasury yield curve, a barometer of the health of the U.S. economy, widened to a record earlier this month as investors bet an accelerating recovery will fuel inflation and hurt demand for the unprecedented sales of government debt. The gap between U.S. 2- and 10-year yields widened to a record 2.88 percentage points on Dec. 22, from 1.45 percentage points at the beginning of the year. The spread was at 2.72 percentage points today. Companies in the U.S. expanded more than anticipated in December as orders and employment grew, a report today by the Institute for Supply Management-Chicago Inc. showed. The group’s business barometer rose to 60, more than forecast in a Bloomberg News survey and the highest level since January 2006. Readings above 50 signal expansion. Bernanke’s Outlook An index of home prices in 20 U.S. cities rose in October for a fifth consecutive month, the S&P/Case-Shiller home-price index showed yesterday. Confidence among U.S. consumers increased in December for a second month, the New York-based Conference Board’s consumer confidence index showed yesterday. Fed Chairman Ben S. Bernanke has cited a tame inflation outlook as a reason for keeping the target interest rate for overnight loans between banks at a record low zero to 0.25 percent. Treasury Inflation Protected Securities, or TIPS, a gauge of trader expectations for consumer prices, show the improving economy may change sentiment and spark further bond declines. The gap between yields on Treasuries and TIPS due in 10 years, a measure of the outlook for consumer prices, expanded to 2.43 percentage points yesterday, the widest since July 2008. It was 2.41 percentage points today. To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net

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Wall Street’s Bets Against Mortgage-Linked Securities Said to Draw Probe

December 24, 2009

By David Scheer Dec. 24 (Bloomberg) — The U.S. Securities and Exchange Commission and brokerage regulators are examining how Wall Street firms bet against mortgage-linked securities to profit as their clients took losses, people familiar with the matter said. The Financial Industry Regulatory Authority, which polices broker-dealers, is looking into whether firms such as Goldman Sachs Group Inc. broke rules when selling products known as synthetic collateralized debt obligations, one of the people said. The people declined to be identified because the inquiry is confidential. One focus of the inquiries is whether firms purposely linked the instruments to mortgages likely to default , leaving clients facing billions of dollars in losses if the housing market collapsed, while simultaneously setting up short sales that would profit from the decline, the New York Times said in a report today. The synthetic CDOs being reviewed typically don’t contain actual mortgages, the Times said. Instead, the CDOs bundled credit-default swaps, a type of insurance that can require an investor on one side of the contract to pay the other side when debts go into default. New York-based Goldman Sachs and Morgan Stanley are among firms that created the products for clients, then bet the underlying assets would fail, the Times said, citing unidentified traders. “Many of the synthetic CDOs arranged were the result of demand from investing clients seeking long exposure,” Goldman said in a statement on its Web site responding to the Times article. “The buyers of synthetic mortgage CDOs were large, sophisticated investors” who employed researchers and “did not rely upon the issuing banks in making their investment decisions,” the bank said. Goldman’s investment losses on mortgages would have been greater if it hadn’t hedged positions, the statement said. Morgan Stanley spokesman Mark Lake, SEC spokesman Kevin Callahan and Finra’s Brendan Intindola declined to comment. To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net .

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Orders for Durable Goods in U.S. Probably Climbed as Investment Picked Up

December 24, 2009

By Courtney Schlisserman Dec. 24 (Bloomberg) — Orders for U.S. durable goods probably rose in November as improving sales prompted companies to boost stockpiles and invest, economists said before a report today. Bookings for goods meant to last several years increased 0.5 percent after declining 0.6 percent in October, according to the median estimate of 72 economists surveyed by Bloomberg News. Another report may show fewer Americans applied for jobless benefits last week. Companies such as 3M Co. are among those anticipating they’ll increase spending on research and new products next year, which may help sustain growth and generate jobs. A record reduction in inventories over the first nine months of the year will also give factories reason to speed up assembly lines. “Inventories are extremely lean, so manufacturers are seeing a nice pickup in demand,” said Mark Vitner , a senior economist at Wells Fargo Securities Inc. in Charlotte, North Carolina. “There’s certainly a lot of room to the upside for business investment.” The Commerce Department is scheduled to issue the durable goods report at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 1.3 percent to a 2.1 percent increase. Excluding transportation equipment, orders probably increased 1.1 percent after falling 1.3 percent in October. Fewer Claims A report from the Labor Department may show initial jobless claims fell to 470,000 last week from 480,000 in the previous seven days. Applications have held below 500,000 since the third week of November, the best performance in a year. Combined sales at manufacturers, wholesalers and retailers have been increasing since June, giving businesses the confidence to begin updating machinery. Purchases of equipment and software increased at a 1.5 percent pace in the third quarter, the first gain since 2007, the Commerce Department reported this week. “Overall commercial spending is looking better than what we had hoped for,” Steve Felice , president of Round Rock, Texas-based Dell Inc. ’s small- and medium-business division, said Dec. 21 in a Bloomberg Television interview. “We’re coming into this holiday season much more optimistic than a year ago.” 3M will increase capital expenditures next year by as much as 15 percent to about $1.05 billion, Chief Executive Officer George Buckley said Dec. 22. The St. Paul, Minnesota-based company will spend as much as $100 million to research new products, part of which will be used to hire 60 to 80 employees with doctorates, he said. 3M trimmed about 6,400 jobs worldwide since last year and Buckley said he anticipates no large reductions in 2010 unless conditions change. Orders at Boeing Co. , which are often volatile, may have limited last month’s projected advance. The world’s second- biggest airplane maker said it received bookings for nine aircraft in November, down from 14 the previous month and 20 in September. To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

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Asian Stocks Fall, Led by China, Hong Kong Developers; Mining Shares Gain

December 15, 2009

By Shiyin Chen and Susan Li Dec. 15 (Bloomberg) — Asian stocks declined, led by Chinese developers, on speculation China will curb land speculation. Oil and copper rose, and the Australian dollar fell after the central bank damped expectations for higher loan rates. The MSCI Asia Pacific Index fell 0.4 percent to 119.92 at 4:20 p.m. Tokyo time. Futures on the Dow Jones Euro Stoxx 50 were up 0.4 percent at 7:20 a.m. in London. U.S. stock futures were little changed. Oil snapped a nine-day losing streak, the longest in eight years, as prices below $70 a barrel triggered purchases that sent crude up 0.6 percent to $69.89 a barrel. Copper for delivery in three months in London rose 0.5 percent to $6,945 a metric ton. The Aussie fell 0.5 percent versus the dollar and declined against 15 of its 16 counterparts. The Chinese government will target “excessive” property price increases in some cities, the state-owned Xinhua News Agency said. Separately, rising Chinese demand may boost metals prices next year, Roger Agnelli , the chief executive officer of Vale SA, the world’s largest iron ore producer, said yesterday. “Markets have rebounded quite strongly and if you look at valuations across the region, it’s probably the most expensive on a global basis,” Christopher Wong , a fund manager at Aberdeen Asset Management Ltd. in Singapore, which oversees about $25 billion of Asian assets, said in a Bloomberg Television interview today. ”And Asia does not offer much value in a valuation perspective, which is why we’re a bit cautious going into the new year.” The MSCI Asia Pacific Index lost 0.2 percent to 120.15. The gauge is up 34 percent this year, set for its biggest annual gain since 2003. The Shanghai Composite index fell 0.8 percent, led by property companies. ‘Winding Down’ “There’s just a general feeling that we are winding down for New Year and the bulk of the buying has been done this year,” said Chris Weston , an institutional dealer at IG Markets in Melbourne. “We’re just lacking the catalyst to really attract buyers at present. Traders are more happy to trade individual news stories.” China Vanke Co. led declines among shares of China’s real-estate companies on speculation the government will take more steps to curb property speculation. China Vanke Co., the nation’s biggest listed developer, slid 2.5 percent to 11.50 yuan in Shenzhen after the Xinhua News Agency said the government will target “excessive” growth in property prices in some cities. Poly Real Estate Group Co. lost 2.9 percent to 23.86 yuan. China’s property prices climbed last month at the fastest pace since July 2008, adding to concern that record lending may fuel unsustainable asset-price increases. The State Council said last week the government will re-impose a sales tax on homes sold within five years, after cutting the period to two years in January. “Government policy is a big risk to property stocks,” said Zhang Qi , an analyst at Haitong Securities Co. in Shanghai. China Demand “We see strong evidence” that Chinese demand “is booming and there is still a lot of room” for consumption outside of China to improve in the first half of 2010, said Macquarie Group Ltd. analysts led by Jim Lennon in a report today. Inbound shipments of copper to China climbed 10 percent last month from October, the customs office said Dec. 11. The London Metal Exchange index of six industrial metals increased 2 percent in the past two days, as Dubai debt default concerns eased. Copper used in power cables, homes and cars has more than doubled this year as the global economy recovers from its worst postwar recession, while the dollar slid 6.1 percent in the same period. Copper imports by China, the world’s largest metals user, rebounded 10 percent from a nine-month low in November. Crude advanced from its lowest level in more than two months amid falling industrial output in Europe and the smallest improvement this year in consumer confidence in Japan, the third-largest oil-consuming country. Yesterday, oil fell to $69.51, the lowest settlement since Sept. 29. Prices have gained 57 percent this year after tumbling 54 percent in 2008. “In the New Year, investors are going to start to reload, and therefore we can expect that right now is a good buy opportunity,” Victor Shum , a senior principal at consultants Purvin & Gertz Inc., said in a Bloomberg Television interview in Singapore. “I expect pricing to average $80 a barrel in 2010.” Australian Rates The Australian dollar fell to 91.25 U.S. cents from 91.68 after the nation’s central bank said it discussed keeping interest rates unchanged in minutes of its December meeting, when policy makers raised borrowing costs for an unprecedented third straight month. “The question for members was whether it was more appropriate to take a further step at this meeting or to hold the cash rate steady pending a further evaluation of developments,” Reserve Bank of Australia policy makers said in minutes released today of their Dec. 1 gathering. Their next meeting will be in February. Benchmark interest rates are 3.75 percent in Australia , compared with 0.1 percent in Japan and as low as zero in the U.S. The dollar was little changed at $1.4650 per euro in Tokyo from its close in New York yesterday, and 0.4 percent weaker than its two-month high of $1.4586 on Dec. 11. Won Falls The South Korean won dropped on concern yesterday’s gain was excessive given Abu Dhabi’s bailout of a Dubai won’t clear up all of the city’s debt. The won weakened 0.4 percent to 1,161.85 per dollar, following yesterday’s 0.6 percent rally. The price of debt from Dubai state-controlled entities DP World Ltd., Dubai Commercial Operations Group LLC and Nakheel PJSC remains as much as 29 percent lower than before the emirate said on Nov. 25 it was seeking a “standstill” from creditors. The global recovery, growing profits and low interest rates will help extend the bull market for Asia stocks outside of Japan, JPMorgan Chase analysts led by Adrian Mowat wrote in a report today. Iron ore sold under contracts may gain 20 percent next year, compared with an earlier forecast for a 10 percent rise, JPMorgan said. BHP added 0.8 percent to A$40.96, while Rio Tinto Group , the world’s third-biggest mining company, gained 0.9 percent to A$71.15. BHP was raised to “neutral” from “underweight” and Rio was raised to “overweight” from “neutral,” JPMorgan analysts said yesterday in a separate report. Raw-material producers are the best performing of the MSCI Asia Pacific Index’s 10 industry groups this year. For Related News and Information To contact the reporters on this story: Shiyin Chen in Singapore at Schen37@bloomberg.net ; Susan Li in Hong Kong at sli31@bloomberg.net

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U.S., U.K. AAA Ratings May Be Tested as Finances Deteriorate, Moody’s Says

December 8, 2009

By Rocky Swift Dec. 8 (Bloomberg) — Moody’s Investors Service said today the U.S. and U.K. had “resilient” AAA ratings, as opposed to the “resistant” top ratings on Canada, Germany and France which were less impacted by the financial crisis. Public finances in “resilient” AAA rated countries are “deteriorating considerably and may therefore test the AAA boundaries,” Moody’s said in a report today. None of the top- rated countries were “vulnerable,” or had public finances that were “stretched beyond the point of ‘no return’ to the AAA category,” according to the report. To contact the reporter on this story: Rocky Swift at rswift5@bloomberg.net .

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S&P 500 Facing `Breakdown’ If 1,085 Support Is Broken: Technical Analysis

December 1, 2009

By Adam Haigh Nov. 30 (Bloomberg) — The Standard & Poor’s 500 Index is close to breaching a support level that may cause a short-term “breakdown” in U.S. equities of more than 3 percent, according to technical analysts at Concept Capital. The benchmark index for U.S. equities closed down 1.7 percent at 1,096.23 on Nov. 27 as Dubai’s attempt to delay debt repayments rattled investors. That’s less than 1 percent above 1,085, the support level seen by John Kolovos and Craig Peskin at New York-based Concept Capital. “A violation of that support will increase the odds of a test of the lower boundary of the trend channel” around 1,050, they wrote in a report today. The index reached the upper area of its three-month trend channel more than a week ago, according to the note. The S&P 500 hasn’t closed below 1,050 since Nov. 4. The measure has rallied more than 60 percent from a 12-year low on March 9 amid signs the world economy is improving. “While a test of the lower boundary of the current trend channel is increasingly more likely, the bigger question is whether that potential area of support will hold” around the 1,050 level , Kolovos and Peskin said. Concept Capital, an institutional broker based in New York, hired the two former Lehman Brothers Holdings Inc. analysts earlier this year to run a new technical research unit. Technical analysts look at price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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World’s Most Expensive Office Markets Get Cheaper as Job Cuts Pare Demand

December 1, 2009

By David M. Levitt and Simon Packard Dec. 1 (Bloomberg) — The world’s most expensive office markets got a little cheaper this year. More than 130 cities worldwide saw rent expenses decline an average of 7.7 percent in the year ended Sept. 30, CB Richard Ellis Group Inc. said in a report today. Almost 50 cities reported declines of more than 10 percent. Rental costs fell about 30 percent in Midtown Manhattan , 53 percent in Singapore and 41 percent in central Hong Kong. “The places that went up the fastest and highest also came down the fastest and at greater depth,” said Raymond Torto , chief economist for CB Richard Ellis, the largest publicly traded broker. “You party Saturday night and you pay for it on Sunday morning. That’s true across the globe.” The global recession and credit crisis are pushing down office rents as companies pare jobs. About 1.93 million job cuts have been announced worldwide this year, Bloomberg data show. In the U.S., the unemployment rate jumped to 10.2 percent in October, the highest level since 1983. London’s West End district retained its position as the world’s most expensive office location, Los Angeles-based CB Richard Ellis said. Offices there cost $184.85 a square foot. That’s down 26 percent from a year ago in U.S. dollars or 18 percent in pounds. With the exception of CB Richard Ellis’s May survey, when London was passed by inner central Tokyo, the broker estimates that the West End has held the title of the world’s most expensive office site since 2001. West End Rents West End rents have been pushed higher by the Mayfair and St. James’s neighborhoods, home to Europe’s largest concentration of hedge funds. The cost of leasing space in the two locations may rise as the municipality lifts business property taxes by at least 70 percent over the next five years, CB Richard Ellis researcher Gary Martin said. “None of the other main global office markets will have such an uplift,” said the London-based analyst. Inner central Tokyo came in second in the CB Richard Ellis survey, while outer central Tokyo came in third. Central Hong Kong was fourth and Moscow was fifth. A year ago the order was the West End, Moscow, central Hong Kong, inner central Tokyo and Mumbai. London and many Asian markets are showing signs of economic stability, Torto said. Most of the rent declines in those markets have probably already happened, he said. “I would think that a year from now those markets will have sobered up,” he said. New York Falls New York City’s Midtown Manhattan came in 24th in the CB Richard Ellis survey, down from 15th last year. It remains the most expensive U.S. office market. In the Americas, Sao Paulo and Rio de Janeiro displaced Midtown as the most expensive markets for offices. Rio rose to 12th in the semi-annual survey from 37th a year ago, while Sao Paulo rose to 16th from 26th. The rise in the two Brazilian cities is “part of the changing world,” with the country’s oil and sugar cane ethanol industries helping to push demand, Torto said. New York’s decline paralleled a drop in financial services employment, he said. Offices in New York averaged $68.93 a square foot at the end of September, compared with $87.47 in Rio and $81.81 in Sao Paulo, South America’s biggest city. Rio office costs increased 12.1 percent, the second biggest increase in the survey. Sao Paulo has about 115 million square feet of offices, about the size of Chicago’s office market, according to Torto. ‘Violent Increase’ “With the emerging economies, their office markets are much more volatile, and they have a much more limited supply of grade-A office space,” said Dan Fasulo , managing director of Real Capital Analytics Inc., a New York-based firm that tracks commercial property sales. “So when there’s an economic boom, there’s always a violent increase in occupancy costs due to constrained supply.” Brazil may grow 5 percent in 2010 after an expected 0.2 percent growth this year, according to the median forecast in a Nov. 27 central bank survey of about 100 economists. Rio was among 41 cities in the survey where costs rose. The biggest increase was in Aberdeen, Scotland, where office costs rose 12.3 percent. Sao Paulo office costs were little changed. CB Richard Ellis defines occupancy costs as a rental charges including taxes and service fees. To contact the reporters on this story: David M. Levitt in New York at dlevitt@bloomberg.net ; Simon Packard in London at packard@bloomberg.net .

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Emerging Markets Rebound, Dollar Drops as Dubai Concern Eases; Oil Climbs

November 30, 2009

By Stuart Wallace Nov. 30 (Bloomberg) — Emerging-market stocks rebounded, sending the MSCI Emerging Markets Index to its biggest gain in two weeks, as Abu Dhabi’s pledge to back Dubai’s banks soothed investors. The dollar retreated, sending commodities higher. The developing-nation index rallied 1.2 percent at 10:18 a.m. in London and the MSCI World Index of equities in 23 developed countries advanced 0.3 percent. Europe’s Dow Jones Stoxx 600 Index fell 1.1 percent as the Dubai statement disappointed some investors and futures on the Standard & Poor’s 500 Index declined 0.2 percent. The dollar weakened against all 16 major currencies tracked by Bloomberg. The S&P GSCI index of 24 commodities rose 0.7 percent. The United Arab Emirates’ central bank said it “stands behind” Dubai’s local and foreign banks after the request by government-controlled Dubai World for a standstill agreement with creditors threw doubt on $59 billion of liabilities. The announcement hit stock markets around the world, reducing global market value by 2.5 percent to $48.1 trillion. Investors “certainly realize that the systemic risks from Dubai are likely to be limited over the long term,” Koon Chow , an emerging-markets strategist at Barclays Capital, said in an interview with Bloomberg Television in London. “People are going to come back and say, ‘I still like Asia and I still like parts of Latin America.’” Europe Declines European stocks fell, trimming the Stoxx 600’s monthly gain to 2 percent. Bank of Ireland Plc slid 1.8 percent in Dublin after saying it may report a loss of 3.4 billion euros ($5.1 billion) on loans it sells to the country’s so-call bad bank. The decline in U.S. stock-index futures indicated that the Standard & Poor’s 500 Index may pare its 5.3 percent monthly gain, after the National Retail Federation indicated that consumers spent less during the Thanksgiving holiday. The benchmark gauge of U.S. equities has rallied 61 percent since reaching a low on March 9. Abu Dhabi’s ADX General Index sank 8.2 percent, the most since May 2006. The Dubai Financial Market General Index tumbled 7.3 percent, the most in a year, on the first trading day since the government said Dubai World may delay debt payments. Markets were closed Nov. 26-29 for the Eid Al Adha holiday. Credit-default swaps tied to Dubai government debt fell 76 basis points to 571 and contracts on DP World dropped 114 to 630, according to CMA DataVision prices. Swaps linked to neighboring Abu Dhabi fell 29 basis points to 146 and Qatar declined 8.5 to 111.5, CMA prices show. China Rallies The Shanghai Composite Index rose 3.2 percent for the biggest gain among indexes in major emerging markets. India’s Bombay Stock Exchange Sensitive Index added 1.8 percent as the government said the economy grew at the fastest pace in 1 1/2 years last quarter, beating economists’ estimates. The South Korean won led gains in developing-nation currencies against the dollar, strengthening 1.1 percent. HSBC Holdings Plc, which said it had more deposits than loans in Dubai, gained 4.3 percent in Hong Kong. Suning Appliance Co. , China’s biggest home appliance retailer, climbed 7 percent in Shenzhen after the government said it will maintain stimulus policies next year. The dollar declined against all 16 most-traded currencies tracked by Bloomberg as waning concern that Dubai World may default fanned demand for higher-yielding assets. The U.S. currency fell 1 percent compared with the Australian dollar. Treasuries slipped, with the yield on the 10-year note rising 2 basis points to 3.22 percent, its first gain in more than a week. Dollar Reversal “The dollar has retraced the final part of last week’s gains related to the Dubai World uncertainty, with equity markets in Asia higher and equity markets in the Middle East not showing signs of contagion,” Derek Halpenny , the European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., wrote in a report today. Gold for immediate delivery fell 0.6 percent to $1,170.32 an ounce in London, paring four consecutive weekly gains. Copper for delivery in three months advanced 0.7 percent to $6,902 a metric ton, leading advances in industrial metals. Oil for December delivery rose 0.6 percent to $76.53 a barrel in New York. Wheat, corn and soybeans advanced in Chicago. To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net

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Chinese Drywall Corroding Metal, Wires in U.S. Homes, Safety Agency Says

November 23, 2009

By Mark Drajem Nov. 23 (Bloomberg) — Sulfur emissions from imported Chinese drywall are corroding metal and wires in U.S. homes, federal safety investigators said. A study of 51 homes built or repaired using the Chinese- made drywall found corrosion in the initial samples tested, including on copper air conditioner coils, the Consumer Product Safety Commission said in a report today. U.S. safety officials said they have banned further imports of the drywall, which has prompted 2,100 complaints. Most of the homeowners who complained were from Florida and Louisiana, where the imported drywall was used to rebuild after hurricanes in 2004 and 2005. No new drywall from China has been imported this year, the safety agency said today. A task force formed by the CPSC is developing a system to identify homes with the drywall and a process to deal with its effects. To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

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Chinese Drywall Corroding Metal, Wires in U.S. Homes, Safety Agency Says

November 23, 2009

By Mark Drajem Nov. 23 (Bloomberg) — Sulfur emissions from imported Chinese drywall are corroding metal and wires in U.S. homes, federal safety investigators said. A study of 51 homes built or repaired using the Chinese- made drywall found corrosion in the initial samples tested, including on copper air conditioner coils, the Consumer Product Safety Commission said in a report today. U.S. safety officials said they have banned further imports of the drywall, which has prompted 2,100 complaints. Most of the homeowners who complained were from Florida and Louisiana, where the imported drywall was used to rebuild after hurricanes in 2004 and 2005. No new drywall from China has been imported this year, the safety agency said today. A task force formed by the CPSC is developing a system to identify homes with the drywall and a process to deal with its effects. To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

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Taiwan’s Stocks, Currency Pare Gains as China Financial Pact Lacks Details

November 16, 2009

By Weiyi Lim Nov. 17 (Bloomberg) — Taiwan stocks and the currency pared earlier gains on concern a financial cooperation agreement with China lacked details and will take months to implement. The benchmark Taiex index fell 0.3 percent to 7,767.85 as of 11:12 a.m. in Taipei, after gaining as much as 1.1 percent at the start of the trading session. The Taiwan dollar rose 0.2 percent to NT$32.124, according to Taipei Forex Inc., after reaching NT$32.029, the highest since Oct. 1. “What the market has been expecting to see is the beef, the details on whether Taiwan companies will be allowed to enter China’s financial markets, not the principles we saw,” said Ernest Chiang , who manages the equivalent of $62 million for IBT Asset Management Co. in Taipei. “The announcement isn’t the bullish news the market has been looking forward to.” The accords will enable Taiwanese banks to accelerate expansion in the world’s fastest-growing economy. For China, it will also meet its objective to deepen economic ties with the island that it claims as part of its territory. Cathay Financial Holding Co. , Taiwan’s largest publicly traded financial services company, lost 1.8 percent to NT$59.80, while Chinatrust Financial Holding Co. , Taiwan’s third-biggest, dropped 2.6 percent to NT$20.50. The two parties will begin talks on an economic cooperation framework agreement, or ECFA, at the next round of cross-Strait talks in Taichung, central Taiwan, sometime in mid-December, according to agencies from both sides. ‘Sell Into Strength’ “I believe people would sell into strength,” said Seow Hock Hin , senior vice-president of institutional sales at MF Global Singapore Pte Ltd. “What investors were previously looking at was for banks on both sides of the straits to be able to invest in one another. They now have to wait for the ECFA, which would only happen in 2010.” Taiwan-China relations have improved since President Ma Ying-jeou took office in May 2008 and dropped the pro- independence stance of predecessor Chen Shui-bian . Closer ties with the island’s biggest trading partner may help Ma hasten a recovery in its export-dependent economy, which shrank 7.5 percent in the second quarter. Taiwan’s benchmark stock index has gained 70 percent this year, set for the best annual performance since 1993. The Taiwan dollar traded within a range of NT$33.2 per dollar and NT$32 for the past six months, and was at NT$32.198 yesterday. Its 2 percent gain for 2009 compares with a 36 percent increase for the Brazilian real and a 35 percent climb for the Australian dollar. Only the yen rose less among the 16 most-active currencies. ‘Opposing Gains’ “It has finally happened, which is great, but there are two forces opposing gains,” said Craig Chan , a Singapore-based strategist at Nomura Holdings Inc. “The first is the central bank intervention and the second is capital controls. I am optimistic in the medium- and long-term, but in the short-term any knee-jerk gain won’t be sustained.” Chan’s forecast is for the currency to rise to NT$31.50 in six months and NT$28.50 by the end of next year. The Central Bank of the Republic of China (Taiwan) has intervened in markets by arranging purchases of U.S. dollars. Foreign-exchange reserves rose by $63 billion in the past year to $341.2 billion, according to a Nov. 5 central bank report. October’s increase of $9 billion was the biggest this year. No Imminent Change The accords were signed yesterday by Sean Chen , chairman of the island’s Financial Supervisory Commission, and Liu Mingkang , head of the China Banking Regulatory Commission, the regulators said in separate statements. The two sides agreed on issues including cross-strait financial supervision, information sharing and risk management, the statements said. “We do not exclude the possibility of some profit-taking once the positive sentiment subsides,” Morgan Stanley analysts led by Jesse Wang and Bruce Chou wrote in a report today. “This is because the signing of MOUs simply represents an important first (baby) step and will not be able to change financial business profitability imminently.” President Hu Jintao said China will strive to make progress on a proposed cross-Strait economic agreement this year, Lien Chan , head of a Taiwanese delegation to the Asia-Pacific Economic Cooperation forum, said in Singapore over the weekend. Taiwan and China have been ruled separately since Chiang Kai-shek’s Kuomintang, or Nationalists, fled to the island after being defeated by Mao Zedong’s Communists in 1949. China regards Taiwan as part of its territory. To contact the reporter on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net

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U.S. Stock Futures, Disney Climb; S&P 500 Index Is Set for Weekly Advance

November 13, 2009

By Adam Haigh Nov. 13 (Bloomberg) — U.S. stock-index futures rose, indicating the Standard & Poor’s 500 Index will extend its second consecutive weekly gain, after earnings at Walt Disney Co. and Abercrombie & Fitch Co. topped analysts’ estimates. Walt Disney, the world’s largest media company, added 1.2 percent after saying fourth-quarter profit climbed 18 percent. Abercrombie & Fitch rallied 3.5 percent. A report today may show consumer confidence improved this month. Futures on the S&P 500 expiring in December rose 0.2 percent to 1,089.80 as of 7:22 a.m. in New York. Dow Jones Industrial Average futures gained 0.2 percent to 10,209. Nasdaq- 100 Index futures added 0.2 percent to 1,778. Stocks in Europe advanced as the euro region’s economy emerged from recession in the third quarter, helped by exports from Germany and France. “The markets can make new highs,” said Richard Jeffrey , chief investment officer of Cazenove Capital Management in London who oversees about $15 billion of assets. “If we look towards Christmas and beyond we aren’t going to see substantial progress made in the near term and into 2010 we could see more volatility,” he told Bloomberg Television. The S&P 500 has gained 1.7 percent this week and on Nov. 11 closed at its highest level since October 2008. The index has rallied 61 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007, amid optimism that government stimulus programs and record-low interest rates are helping to drag the economy out of recession. Global Recovery An improving economy and rebounding equities may support consumer confidence even as the job market continues to deteriorate. The Reuters/University of Michigan preliminary sentiment index for this month, due today at 10 a.m., may rise to 71 from 70.6 in October, according to the median estimate of economists surveyed. International Monetary Fund Managing Director Dominique Strauss-Kahn said the global economic recovery will take years and won’t be a one-size-fits-all situation. Asia will lead the recovery, followed by the U.S. and then Europe, he said in Singapore today. Higher joblessness is likely for advanced nations next year, he said. Walt Disney added 1.2 percent to $29.39 in German trading. Net income increased to $895 million from $760 million a year earlier. Excluding one-time items, profit of 46 cents a share beat the 41-cent average estimate of 21 analysts. Sales gained 4.5 percent to $9.87 billion in the period ended Oct. 3, topping the $9.3 billion average estimate of 18 analysts. Abercrombie & Fitch Abercrombie & Fitch climbed 3.5 percent to 38.05 in pre- market New York trading as the teen-clothing retailer reported a third-quarter adjusted profit of 30 cents per share, while analysts in a Bloomberg survey estimated 20 cents. Eighty-three percent of S&P 500 companies that have released results since Oct. 7 exceeded the average analyst estimate for third-quarter earnings per share, according to data compiled by Bloomberg. Nordstrom Inc. may move after the U.S. department-store chain with more than 100 namesake locations predicted its gross margin, a measure of profitability that indicates the percentage of sales left after the cost of goods sold, would widen at most by 20 basis points for the full year. Bill Dreher , an analyst with Deutsche Bank AG projected a 34 basis-point improvement. A basis point is equivalent to 0.01 percentage point. The shares dropped 4.4 percent in early trading. Liberty Global Inc., the international cable company controlled by billionaire John Malone , agreed to buy Unitymedia GmbH for about 2 billion euros ($2.98 billion). The stock fell 0.9 percent to $22.89 in Germany. The trade deficit in the U.S. probably widened in September, reflecting rising demand for imported oil and automobiles as the economy rebounded from the worst recession since the 1930s, economists said before a report today. The gap increased to $31.8 billion from $30.7 billion the prior month, according to the median of 77 estimates in a Bloomberg News survey. Other figures today may show the cost of goods from abroad rose in October for a third straight month. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net .

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European Stocks Rise for Fifth Day; HSBC Shares Gain, Barclays, CRH Drop

November 10, 2009

By Sarah Jones Nov. 10 (Bloomberg) — European stocks climbed for a fifth day as earnings from HSBC Holdings Plc, the region’s biggest bank, overshadowed concern a report may show German investor confidence retreated for a second month. HSBC gained 3.6 percent as the lender said third-quarter profit was “significantly” higher than a year ago on lower loan provisions. Barclays Plc fell 2 percent after the U.K.’s second-largest bank posted a 54 drop in net income on higher impairment charges. CRH Plc slid 2.8 percent as the world’s second-largest maker and distributor of building materials forecast profit this year will fall as much as 55 percent. Europe’s Dow Jones Stoxx 600 Index rose 0.3 percent to 246.39 at 9:19 a.m. in London. The gauge has advanced 56 percent since March 9 amid speculation government stimulus measures and record-low interest rates are helping to drag the economy out of recession. A report today may show German investor confidence fell in November as the prospect of expiring government stimulus programs and rising unemployment tempered expectations for economic growth. The ZEW Center for European Economic Research’s index of investor and analyst expectations slipped to 55 from 56 in October, according to the median of 39 forecasts in a Bloomberg News survey. ZEW releases the report, which aims to predict developments six months ahead, at 11 a.m. in Mannheim today. U.S., Asian Stocks Futures on the U.S. Standard & Poor’s 500 Index expiring in December slipped 0.1 percent, indicating the benchmark for U.S. equities may fall for the first time in seven days. U.S. stocks surged yesterday after the Group of 20 nations agreed to maintain economic stimulus efforts. The MSCI Asia Pacific Index advanced 0.4 percent as Chinese car sales jumped and exports improved in Taiwan and the Philippines. HSBC rallied 3.6 percent to 717.4 pence as the bank said impairments declined in the third quarter to the lowest level since the first half of 2008. Profit so far this year is higher than 2008 on an underlying basis that excludes movements in fair value on the bank’s debt, HSBC said. Barclays retreated 2 percent to 335.85 pence after posting a 54 percent drop in third-quarter net income to 1.08 billion pounds ($1.8 billion) and saying nine-month impairments were “significantly above” the year-earlier period. Impairments for the full year are “expected to be around the bottom end of the previously referenced 2009 consensus range of 9 billion pounds to 9.6 billion pounds” made in August, the bank said. CRH Drops CRH sank 2.8 percent to 17.40 euros in Dublin after forecasting lower profit on costs to cut jobs and as poor weather in parts of the U.S. hampered construction. Pretax profit will probably reach 730 million euros to 760 million euros, compared with 1.63 billion euros in 2008 and exchange- rate losses will also weigh on earnings, CRH said. Strategists at Credit Suisse recommended investors increase their holdings in mainland European shares, upgrading the region to “overweight” from “underweight.” “Continental Europe tends to outperform when both global lead indicators rise and earnings are being revised up, a combination we expect to continue into the first half of 2010,” strategists including Andrew Garthwaite wrote in a report today. “Europe tends to outperform when interest rate expectations start to rise.” To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net .

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Treasury 10-Year Yield Jumps After Fed Policy Makers Say Economy Improving

November 4, 2009

By Susanne Walker and Daniel Kruger Nov. 4 (Bloomberg) — Treasuries fell for a third day after Federal Reserve officials said they’re more optimistic about the economic outlook and the U.S. announced plans to sell $81 billion in notes and bonds next week. Yields on 10-year notes rose even as central bankers repeated their pledge to leave the target rate for overnight loans between banks in a range of zero to 0.25 percent for an “extended period.” The gap in yields between two- and 10-year notes widened to 264 basis points, the most since July 27. “The longer the Fed doesn’t change anything in terms of their assessment, it pushes rate hikes out into the future,” said Christopher Bury, co-head of fixed-income rates at Jefferies & Co., one of the 18 primary dealers that trade with the central bank. “To the extent the market is worried that they’d be behind the curve and late to tighten, that would be inflationary.” The 10-year note yield rose eight basis points, or 0.08 percentage point, to 3.55 percent at 3:08 p.m. in New York, according to BGCantor Market Data. Yields on the two-year note, most sensitive to interest- rate changes, fell two basis points to 0.90 percent. Thirty-year bond yields climbed nine basis points to 4.42 percent. The Fed completed its $300 billion program of purchasing Treasuries last month. Today’s statement said the central bank will purchase a total of $1.25 trillion of agency mortgage- backed securities and “about $175 billion of agency debt” through the first quarter of next year. Inflation Expectations “The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion is consistent with the recent path of purchases and reflects the limited availability of agency debt,” the statement said. “It’s on the dovish side,” said Alex Li, an interest-rate strategist in New York at Credit Suisse AG, another primary dealers. “It raises investors’ concern for the long rates. They are going to stay low and long-term inflation expectations may be going up.” The difference between rates on 10-year notes and Treasury Inflation Protected Securities , which reflects the outlook among traders for consumer prices, rose to 2.13 percentage points, equaling the high for the year set on June 10. The so-called breakeven rate was 0.01 percentage point on Dec. 31. Treasuries lost 2.8 percent this year, according to Merrill Lynch & Co.’s U.S. Treasury Master Index, amid concern the economy shows signs of emerging from the longest recession in at least 50 years and debt sales climbed. Borrowing Estimates The government will sell $40 billion of three-year notes, $25 billion of 10-year debt and $16 billion of 30-year bonds next week, equaling the average forecast of $81 billion in securities from six of the primary dealers that will bid on the three auctions. The amounts are all records, according to data compiled by Bloomberg. The Treasury cut its estimate for government borrowing in the current quarter by 43 percent largely because of reductions in a program for helping the Fed manage its balance sheet . Borrowing will total a net $276 billion from October through December, compared with a previous estimate of $486 billion, and it projects borrowing $478 billion in the three months to March 31, the department said Nov. 2. In the quarter that ended Sept. 30, the Treasury borrowed $393 billion, compared with $406 billion projected three months ago. President Barack Obama said Oct. 29 in a speech at the White House that U.S. economic growth in the third quarter affirms that the recession is abating. A Commerce Department report that day showed the economy expanded at a more-than- forecast 3.5 percent annual rate in the quarter. Employment Report A Labor Department report on Nov. 6 may show the jobless rate rose to 9.9 percent in October, even as the economy returned to growth. Companies in the U.S. cut payrolls an estimated 203,000 jobs in October, according to a report today from ADP Employer Services, compared with a revised 227,000 drop the prior month. The figures were forecast to show a decline of 198,000 jobs, according to the median estimate of a Bloomberg survey. The Federal Open Market Committee was expected to leave its benchmark rate unchanged, according to all 95 economists in a Bloomberg survey. The Fed has held its target rate for overnight loans between banks at zero to 0.25 percent since Dec. 16. The Obama administration has increased the public debt to a record $7.01 trillion as it borrows unprecedented amounts to fund economic-stimulus plans. The figure is equivalent to almost half of the $14.2 trillion economy, according to data compiled by Bloomberg. To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net ; To contact the reporters on this story: Daniel Kruger in New York at dkkruger1@bloomberg.net

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Consumer Spending in U.S. Probably Decreased After `Clunkers’ Plan Expired

October 30, 2009

By Timothy R. Homan Oct. 30 (Bloomberg) — Spending by U.S. consumers probably fell in September for the first time in five months as auto dealer showrooms emptied in the wake of the government’s auto- rebate program, economists said before a report today. Purchases decreased 0.5 percent after a 1.3 percent jump in August that was the biggest in almost eight years, according to the median forecast of 75 economists surveyed by Bloomberg News. Other reports may show consumer sentiment dropped this month and business activity shrank at a slower pace. Today’s spending report may also show Americans’ incomes were little changed last month as payrolls dropped and unemployment climbed. Stagnant wages and waning confidence raise the risk that consumers will retrench in coming months as government assistance programs such as the so-called cash-for- clunkers plan expire. “Income growth will remain sluggish in the fourth quarter because of job losses,” said Nigel Gault , chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “The fuel for consumer spending isn’t there.” The Commerce Department report is due at 8:30 a.m. in Washington. Spending estimates in the Bloomberg survey ranged from a decline of 0.9 percent to a gain of 0.5 percent. An unchanged reading on incomes would follow gains of 0.2 percent in August and July. At 10 a.m., Reuters/University of Michigan figures may show the index of consumer sentiment fell to 70 from 73.5 in September, according to the survey median. Estimates ranged from 68 to 74. A preliminary reading earlier this month came in at 69.4. Monthly Breakdown Today’s spending report will provide the monthly breakdown of the quarterly figures issued by the Commerce Department yesterday, which may influence the outlook for the next three months. Household purchases, which account for about 70 percent of the economy, rose at a 3.4 percent annual pace in the third quarter , the strongest performance in more than two years, the figures showed. The world’s largest economy expanded at a 3.5 percent rate from July through September, exceeding the median estimate of economists surveyed. The report on gross domestic product contributed to the biggest advance in benchmark stock indexes since July. The Standard & Poor’s 500 Index climbed 2.3 percent to close at 1,066.11. Contract Less The Institute for Supply Management-Chicago Inc.’s business barometer probably rose to 49 this month from 46.1 in September, according to the survey median. Readings below 50 signal contraction. The report is due at 9:45 a.m. Washington time. Kellogg Co. , the largest U.S. breakfast-cereal maker, yesterday reported third-quarter profit that exceeded analysts’ estimates as costs fell more than sales. “Consumers remain nervous and are more value conscious than they were a couple of years ago,” Chief Executive Officer David Mackay said in a telephone interview. “We have to be pragmatic about consumers and the issues and pressures they face, and try to help them in any way we can.” A report from the Labor Department scheduled for release at 8:30 a.m. may show employment expenses in the U.S. rose 0.4 percent in the third quarter, the same as in the previous three months, according to the median estimate of economists surveyed. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Video: GM’s Lutz Sees U.S. Growth Boosting Consumer Confidence: Video

October 29, 2009

Oct. 29 (Bloomberg) — Bob Lutz, vice chairman of General Motors Co., talks with Bloomberg’s Greg Miles about a report today showing the U.S. economy returned to growth in the third quarter. Lutz also discusses today’s race between GM’s Cadillac CTS-V and rival sedans. (Source: Bloomberg)

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Nucor Posts Third Straight Loss on Higher Raw-Material Costs, Demand Drop

October 22, 2009

By Edmond Lococo Oct. 22 (Bloomberg) — Nucor Corp. , the second-largest U.S.-based steelmaker by sales, reported its third straight quarterly loss as it continued to work through high-priced raw materials secured before a drop in global demand for the metal. The third-quarter loss of $29.5 million, or 10 cents a share, compares with net income of $734.6 million, or $2.31, a year earlier, Charlotte, North Carolina-based Nucor said today in a statement. Sales dropped 58 percent to $3.12 billion. Nucor said last month the third quarter would be the last in which it would have to work through an inventory of high-cost pig iron it bought before the global slowdown led to a drop in raw-material prices in 2008’s fourth quarter. The company today repeated Chief Executive Officer Dan DiMicco’s statement from last month that there has been little improvement in real demand and that there may be a “a long, slow recovery.” “Earnings were negatively impacted by the accelerated consumption of the high-cost scrap purchased in mid-2008,” Michael Willemse , a Toronto-based analyst with CIBC World Markets Inc., wrote in a report today. “Management’s guidance suggested a lack of clarity for Q4/09 primarily due to the continued uncertainty in the economy and the traditional seasonal slowdown in the quarter.” The company was projected to report a loss of 15 cents, the average estimate of 14 analysts surveyed by Bloomberg. Sales were projected at $3 billion. On Sept. 15, the company predicted a third-quarter loss of 15 cents to 20 cents a share. At the time, Nucor estimated consumption of high-priced materials cut $180 million, or 37 cents a share, from after-tax profit for the period. Share Performance Nucor fell $1.52, or 3.3 percent, to $44.48 at 12:03 p.m. in New York Stock Exchange composite trading . The shares were little changed this year before today. U.S. Steel Corp., the largest U.S.-based steelmaker by 2008 sales, declined 63 cents, or 1.5 percent, to $41.48. The company is scheduled to host an earnings call Oct. 27. The average U.S. price of hot-rolled steel sheet , the benchmark product used in cars and appliances, climbed to $535 a ton in September from $475 in August and $430 in July, according to data compiled by Purchasing Magazine. In June, prices had dropped to $380 a ton, the lowest since January 2004 and 64 percent below the record of $1,068 a ton in July 2008. Steel output in the U.S. this year through Oct. 17 fell 46 percent to 47.7 million tons from a year earlier, according to the American Iron and Steel Institute. Steel Dynamics Inc. , the third-largest U.S.-based steelmaker, said Oct. 19 it returned to profit after three quarterly losses as production and shipping volume of flat- rolled metal improved in the third quarter. Sales and profit, which were down from last year, both exceeded analysts’ estimates. Net income was $69 million, or 30 cents a share, on sales of $1.17 billion. To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net .

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Hamptons Home Sales Surge 32% as Buyers Return to Seaside Celebrity Haven

October 22, 2009

By Oshrat Carmiel Oct. 22 (Bloomberg) — Home sales in the Hamptons, the Long Island beach retreats favored by Hollywood celebrities and Wall Street financiers, surged 32 percent in the third quarter as deal seekers landed discounted properties. Transactions climbed to 339 from 257 a year earlier, the biggest increase in five years of records, New York-based appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today. The median price dropped 2.4 percent to $810,000. “It shows the power of affordability,” Miller Samuel President Jonathan Miller said in an interview. “There’s enough value in the market for people to recognize it.” Concessions averaged 19 percent off asking prices as sellers sought to lure buyers. New York financial companies cut 32,000 city jobs in the 12 months through September, the state Labor Department said Oct. 15. The reductions came as worldwide losses and asset writedowns tied to sour home loans surpassed $1.6 trillion, according to data compiled by Bloomberg. Wall Street bonuses help drive demand for Hamptons property. New York City’s unemployment rate increased to 10.3 percent in September and total private-sector employment fell by 111,700, or 3.5 percent, in the year through September. “You’re still looking at a very weak economy and very tight credit so it’s hard to see a second-home market as rising when you’re not seeing that in the city,” Miller said. Another View Two other brokerages issued Hamptons sales reports this month. Town & Country Real Estate reported that median home prices across 11 towns and villages that comprise the Hamptons rose 4.7 percent in the third quarter from a year earlier. New York-based brokerage the Corcoran Group said prices climbed 12 percent on the strength of luxury sales. Each report draws data from different sources. Hamptons sales peaked in the second quarter of 2004, when 1,052 properties were traded, Miller said. While this year’s third-quarter sales rose, so did the inventory of unsold homes. Listings climbed 11 percent from a year ago to 1,735 properties. “You had people who had been trying to market their property for the past couple of years who re-entered the market,” Miller said. “You got the ‘Go’ signal with all this activity.” At the current sales pace, it would take almost 16 months to sell all the Hamptons homes listed, Miller said. Luxury Market Luxury sales throughout the Hamptons and Long Island’s North Fork climbed 31 percent in the quarter to 46 transactions. The median luxury price dropped 11 percent from a year earlier to $4.28 million, according to the survey. Miller defines the luxury market as the top 10 percent of sales, which in the third quarter included homes priced at $3.2 million or more. High-end sellers who cut their price did so by an average of 17 percent compared with 14 percent a year ago. To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net .

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Defaults on Speculative-Grade Debt to Soar in Fourth Quarter, Moody’s Says

October 7, 2009

By Patricia Kuo Oct. 7 (Bloomberg) — Defaults on speculative-grade company debt will rise to a peak in the fourth quarter before declining in a year’s time, according to Moody’s Investors Service. The global default rate will climb to 12.5 percent before year-end and drop to 4.5 percent in September next year, Moody’s said in a report today. The rate was at 12 percent at the end of the third quarter, up from 10.6 percent in the previous three- month period, the New York-based ratings firm said. A year ago, defaults were happening at a rate of just 2.8 percent. The U.S. default rate increased to 12.9 percent as of the third quarter, from 11.5 percent in the previous period, Moody’s said. European defaults rose to 9.3 percent, from 6.4 percent in the previous three-month period, according to the report. Of the companies rated by Moody’s, 50 defaulted in the third quarter, down from 89 in the first quarter and 83 in the second three-month period. A total 62 defaults were recorded in the first three quarters of 2008, according to the report. Speculative, or non-investment grade, companies are those rated below Baa3 by Moody’s and BBB- by Standard & Poor’s. To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net

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Unemployment in U.S. Probably Rose, Payrolls Fell, Signaling Slow Recovery

October 2, 2009

By Bob Willis Oct. 2 (Bloomberg) — The U.S. jobless rate probably rose to a 26-year high in September as employers kept cutting staff, signaling consumers will not lead the recovery, economist said before a report today. Unemployment likely climbed to 9.8 percent, the highest since 1983, from 9.7 percent in August, according to the median estimate of 81 economists surveyed by Bloomberg News. Payrolls probably fell by 175,000 workers, the smallest drop in 13 months, they survey also showed. Federal Reserve Chairman Ben S. Bernanke yesterday said the expansion may not be strong enough to “substantially” bring down unemployment, indicating the central bank will be slow to drain the trillions of dollars it’s pumped into the economy. UAL Corp. is among companies still cutting jobs on concern spending will fade as government stimulus wanes. “The magnitudes of the job losses are going to continue to get smaller, but unfortunately we don’t see very much hiring going on,” said David Resler , chief economist at Nomura Securities International Inc. in New York. “Until that changes, doubts about the sustainability of this rebound in economic activity are going to linger.” The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ payroll forecasts ranged from declines of 100,000 to 260,000. Employment Slump The September projection would bring total jobs lost since the recession began in December 2007 to 7.2 million, the biggest decline since the Great Depression. Monthly losses reached a six-decade peak of 741,000 in January. Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by late 2009 and average 9.7 percent for all of next year even as the economy expands at an average 2.6 percent pace in the second half of this year and 2.4 percent in 2010. Bernanke told lawmakers in Washington yesterday that he anticipated the jobless rate will hold above 9 percent though 2010. The Standard & Poor’s 500 Index is down 3.9 percent since Sept. 22 as figures on home sales, manufacturing and business spending were weaker than analysts anticipated. The index is still up 52 percent from a 12-year low in March as the economy showed signs of recovering. While acknowledging that “economic activity has picked up,” Fed policy makers on Sept. 23 said household spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.” Less Income Declining pay is one reason economists project consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Personal income was down 2.6 percent in August from a year earlier, a Commerce Department report yesterday showed. General Motors Co. this week said it would close the Saturn brand after Penske Automotive Group Inc. broke off discussions to buy the unit. Saturn dealers will have until October 2010 to wind down operations. The Detroit-based automaker said in June a Saturn sale would have saved 13,000 jobs and 350 dealerships. GM had called back some workers after the government’s “cash-for-clunkers” plan cut further into inventories that were already diminished during the bankruptcy shutdown. Sales of cars and light trucks plunged last month after the $3 billion incentive plan expired in late August. Vehicles sold at a 9.2 million annual pace in September, down from a 14.1 million annual pace in August. Job Cuts Tenneco Inc. , the largest North American maker of shock absorbers, said Sept. 22 it will shut a factory in Cozad, Nebraska, by the end of next year and shift production of the parts to plants in Georgia, Arkansas and Celaya, Mexico. Airlines are also cutting staff. UAL’s United Airlines, the third-biggest U.S. carrier, last month furloughed 290 more pilots under a plan to trim jobs and limit labor costs, while American Airlines said it would furlough 228 flight attendants. The Labor Department today will also publish its preliminary estimate for the annual benchmark revisions to payrolls that will be issued in February. Employers cut 4.8 million jobs in the 12 months through March 2009, the period covered by the revisions. Economists at UBS Securities LLC in Stamford, Connecticut, said income tax records indicate about another 200,000 jobs were lost from March 2008 through December 2008. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Sales of U.S. Existing Homes Probably Rose to Two-Year High as Prices Fell

September 24, 2009

By Bob Willis Sept. 24 (Bloomberg) — Sales of existing U.S. homes probably climbed in August to the highest level in two years, another sign the real-estate collapse that triggered the global recession is abating, economists said before a report today. Purchases rose 2.1 percent to a 5.35 million annual rate, according to the median forecast of 74 economists in a Bloomberg News survey. It would be the fifth consecutive gain, capping the longest stretch of increases since 2004. Government tax credits for first-time buyers and foreclosure-induced price declines are helping the housing market recover from the worst slump since the Great Depression. Federal Reserve policy makers yesterday committed to keeping interest rates low to ensure the pickup in growth is sustained. “The housing recovery is under way,” said Michelle Meyer , an economist at Barclays Capital Inc. in New York. “While the first-time homebuyer tax credit likely boosted sales, there has been a fundamental shift in home buying due to greater affordability and confidence.” The National Association of Realtors’ report is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from 5.1 million to 5.55 million after a 5.24 million rate in July. Resales reached a 4.49 million pace in January, their lowest level since comparable records began in 1999. A report at 8:30 a.m. from the Labor Department is projected to show the number of Americans seeking jobless benefits rose last week to 550,000 from 545,000 a week earlier. Leading Indicator Purchases of existing homes, which make up more than 90 percent of the market, are tabulated when sales close and therefore reflect contracts signed a month or two earlier. Sales of newly built residences, which make up the rest, are considered a more leading indicator because they are counted when a contract is signed. The Commerce Department may report tomorrow that purchases of new houses rose in August to the highest level in 12 months, according to a Bloomberg survey. Fed policy makers yesterday maintained they will keep the benchmark lending rate near zero “for an extended period,” while noting that the economy and housing had strengthened. They also said they will slow central bank purchases of mortgage debt securities in order to extend the $1.45 trillion program through the first quarter of 2010 rather than completing it by the end of this year. They extended the period to allow more time “to work out of the housing problems,” John Silvia , chief economist at Wells Fargo Securities LLC in Charlotte, North, Carolina, said in a report to clients yesterday. First-Time Buyers The Obama administration’s $8,000 tax credit for first- time home buyers, which is due to expire at the end of November, combined with the plunge in prices as foreclosures climbed, have helped lift sales this year. The Realtors’ group and the National Association of Home Builders have lobbied to extend the credit on concern demand will wane after it lapses. Treasury Secretary Timothy Geithner told reporters on Sept. 17 that the administration would take a “careful look” at extending the credit and called signs of stabilization in the U.S. housing market “very encouraging.” Growing demand has prompted builders such as KB Home to get back to work. Housing starts rose to a nine-month high in August, the Commerce Department reported last week, indicating residential construction may soon add to growth after subtracting from gross domestic product since 2006. Builder Shares The Standard & Poor’s Homebuilder Supercomposite Index is up 32 percent so far this year, compared with a 17 percent gain for the broader S&P 500. Prices, which most economists forecast would be the last component of the market to turn, have begun to improve. The Federal Housing Finance Agency’s home-price index for purchases was up 1.1 percent in the three months through July, the best performance since early 2006. The recent increases may also be contributing to the rise in sales as buyers who had been waiting for prices to turn jump back into the market, economists said. “We’re seeing a firming of prices in a number of markets, not all,” Eli Broad , founder of Los Angeles-based KB Home, said yesterday in an interview with Bloomberg Television. “I think we have bottomed out in many markets.” KB Home on Sept. 16 announced it was resuming its building operations in the mid-Atlantic region, including the Washington, D.C., area. Still, with unemployment forecast to reach 10 percent by the end of the year and record foreclosures adding to the 4.4 million houses on the market, any rebound in sales, construction or prices will take time to strengthen. “I see this as a very slow recovery,” said Broad. “In some markets the inventory is so large it’s going to take a number of years before we go back to what I call normalcy.” To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

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Sales of U.S. Existing Homes Probably Rose to Two-Year High as Prices Fell

September 24, 2009

By Bob Willis Sept. 24 (Bloomberg) — Sales of existing U.S. homes probably climbed in August to the highest level in two years, another sign the real-estate collapse that triggered the global recession is abating, economists said before a report today. Purchases rose 2.1 percent to a 5.35 million annual rate, according to the median forecast of 74 economists in a Bloomberg News survey. It would be the fifth consecutive gain, capping the longest stretch of increases since 2004. Government tax credits for first-time buyers and foreclosure-induced price declines are helping the housing market recover from the worst slump since the Great Depression. Federal Reserve policy makers yesterday committed to keeping interest rates low to ensure the pickup in growth is sustained. “The housing recovery is under way,” said Michelle Meyer , an economist at Barclays Capital Inc. in New York. “While the first-time homebuyer tax credit likely boosted sales, there has been a fundamental shift in home buying due to greater affordability and confidence.” The National Association of Realtors’ report is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from 5.1 million to 5.55 million after a 5.24 million rate in July. Resales reached a 4.49 million pace in January, their lowest level since comparable records began in 1999. A report at 8:30 a.m. from the Labor Department is projected to show the number of Americans seeking jobless benefits rose last week to 550,000 from 545,000 a week earlier. Leading Indicator Purchases of existing homes, which make up more than 90 percent of the market, are tabulated when sales close and therefore reflect contracts signed a month or two earlier. Sales of newly built residences, which make up the rest, are considered a more leading indicator because they are counted when a contract is signed. The Commerce Department may report tomorrow that purchases of new houses rose in August to the highest level in 12 months, according to a Bloomberg survey. Fed policy makers yesterday maintained they will keep the benchmark lending rate near zero “for an extended period,” while noting that the economy and housing had strengthened. They also said they will slow central bank purchases of mortgage debt securities in order to extend the $1.45 trillion program through the first quarter of 2010 rather than completing it by the end of this year. They extended the period to allow more time “to work out of the housing problems,” John Silvia , chief economist at Wells Fargo Securities LLC in Charlotte, North, Carolina, said in a report to clients yesterday. First-Time Buyers The Obama administration’s $8,000 tax credit for first- time home buyers, which is due to expire at the end of November, combined with the plunge in prices as foreclosures climbed, have helped lift sales this year. The Realtors’ group and the National Association of Home Builders have lobbied to extend the credit on concern demand will wane after it lapses. Treasury Secretary Timothy Geithner told reporters on Sept. 17 that the administration would take a “careful look” at extending the credit and called signs of stabilization in the U.S. housing market “very encouraging.” Growing demand has prompted builders such as KB Home to get back to work. Housing starts rose to a nine-month high in August, the Commerce Department reported last week, indicating residential construction may soon add to growth after subtracting from gross domestic product since 2006. Builder Shares The Standard & Poor’s Homebuilder Supercomposite Index is up 32 percent so far this year, compared with a 17 percent gain for the broader S&P 500. Prices, which most economists forecast would be the last component of the market to turn, have begun to improve. The Federal Housing Finance Agency’s home-price index for purchases was up 1.1 percent in the three months through July, the best performance since early 2006. The recent increases may also be contributing to the rise in sales as buyers who had been waiting for prices to turn jump back into the market, economists said. “We’re seeing a firming of prices in a number of markets, not all,” Eli Broad , founder of Los Angeles-based KB Home, said yesterday in an interview with Bloomberg Television. “I think we have bottomed out in many markets.” KB Home on Sept. 16 announced it was resuming its building operations in the mid-Atlantic region, including the Washington, D.C., area. Still, with unemployment forecast to reach 10 percent by the end of the year and record foreclosures adding to the 4.4 million houses on the market, any rebound in sales, construction or prices will take time to strengthen. “I see this as a very slow recovery,” said Broad. “In some markets the inventory is so large it’s going to take a number of years before we go back to what I call normalcy.” To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

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Harvard University’s Investments Lose 27.3%, Less Than December’s Forecast

September 10, 2009

By Gillian Wee Sept. 10 (Bloomberg) — Harvard University, the wealthiest U.S. school, said its investments fell 27.3 percent in the past year, a $10.1 billion loss that was smaller than President Drew Faust’s forecast in December before markets started to recover. The endowment declined to $26 billion from $36.9 billion in the year ended June 30, including the inflow of gifts from donors and $1.7 billion in distributions to the university, according to a report today by Harvard Management Co., which oversees the fund. Gains in non-U.S. fixed-income and emerging- markets securities helped trim a loss that Faust had said could reach about 30 percent. Jane Mendillo , Harvard Management’s chief executive officer, is seeking to rebuild assets and protect the Cambridge, Massachusetts, university against future financial shocks. She raised cash holdings, cut $3 billion in commitments to private- equity and real estate funds, and began shifting assets from outside firms to Harvard Management, according to the report. “We expect a prolonged period of instability and slower growth in some markets,” Mendillo said in the report. “We can do and are doing more to manage the risks we face, given the lessons of the past year.” Harvard fired workers, sold $2.5 billion in bonds and delayed construction projects after the bankruptcy of Lehman Brothers Holdings Inc. in September 2008 crippled financial markets and left the 373-year-old university short of cash. The Faculty of Arts and Sciences , which relied on the endowment for about 60 percent of its income, will cut about $220 million, or 19 percent, from its $1.15 billion budget in the next two years. ‘Oversized Commitments’ It was the first loss in seven years and the biggest in four decades for the endowment, whose earnings helped pay for new professors, expanded financial aid and campus construction. Harvard lost more money in one year than all but the six biggest U.S. universities had in their funds as of June 30, 2008. Harvard entered the worst financial crisis since the Great Depression with “recent oversized commitments to illiquid asset classes,” and didn’t have enough cash to meet “our obligations along with the needs of the university,” Mendillo, who took over as CEO in July 2008, said in the six-page report. The Standard & Poor’s 500 Index plunged 54 percent from the start of 2008 to the nadir on March 9, affecting endowments nationwide. The S&P has since gained more than 50 percent. Endowments probably recorded their biggest losses in 35 years in the 12 months ended June 30, according to research firm Commonfund Institute in Wilton, Connecticut. Yale, Brown Yale University in New Haven, Connecticut, the second- wealthiest U.S. school, said today its endowment dropped an estimated 30 percent to about $16 billion. Yale President Richard Levin said in a July interview that investment declines cut the fund by 25 percent and the school spent 5 percent. Brown University in Providence, Rhode Island, said yesterday that its fund declined 27 percent, including a 23 percent drop in investments. Mendillo, 50, inherited responsibility for the endowment from Mohamed El-Erian , who returned to Pacific Investment Management Co. after less than two years at Harvard Management. She has raised cash by offloading some private-equity stakes, redeeming from hedge funds and selling stocks. The endowment is targeting cash levels this year equivalent to 2 percent of the portfolio, according to the report. In previous years the endowment was fully invested and borrowed to amplify gains. Allocations to other assets remain little changed. Harvard’s public equities and real assets including natural resources beat benchmarks, declining 28 percent and 38 percent, respectively. The international fixed-income and internal emerging-markets teams outperformed indexes by 9 percentage points and 3.7 percent points. Other asset classes trailed benchmarks, including private equity, down 32 percent and absolute-return strategies, off 19 percent. More Liquidity The endowment lowered its commitments to private equity and real estate to $8 billion from $11 billion, as some firms reduced the size of their funds or made capital calls, and Harvard shed some of its pledges through secondary sales. Mendillo is reviewing private-equity and hedge-fund stakes. “With perfect hindsight we and most other investors would have started this year in a more liquid position and with less exposure to some of the alternative asset categories that were hardest hit,” Mendillo said. She said it would be a mistake to “categorically avoid” hard-to-sell assets like natural resources and private equity. “But the balance of liquid and illiquid investments within the portfolio needs to remain in the forefront of our portfolio strategy,” she wrote. Return to Harvard Mendillo was a fund manager at Harvard for 15 years before leaving in 2002 to build Wellesley College’s investment office. She returned as head of Harvard Management when El-Erian resigned in September 2007 to become CEO of Pimco, a bond manager based in Newport Beach, California. El-Erian in February 2006 had succeeded Jack Meyer , the endowment chief of 15 years, whose compensation was criticized by Harvard alumni. Harvard’s internal management team, which is responsible for about one-third of the portfolio, is “extraordinarily cost effective — with total expenses equal to a fraction of the costs of employing outside managers for similar asset pools with similar results,” Mendillo said in the report. Mendillo is considering more collaboration between teams and planning more hires. She added hedge-fund executives Emil Dabora from Caxton Associates LLC and Michele Toscani , a managing director for Fortress Investment Group LLC in Tokyo, to expand her internal investment team, while Mark McKenna , also from Caxton, will start this month in equity arbitrage. “It is important to be realistic about near-term returns and about our expectations for several years to come,” Mendillo said in the report. “The impact of the events of 2008-2009 will not be reversed overnight. For Harvard, as for almost every major investor, regaining the market value lost as a result of the recent global economic crisis will take time.” To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net ;

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U.S. Stocks Advance a Third Day as Gold Tops $1,000 an Ounce, Dollar Falls

September 8, 2009

By Jeff Kearns and Daniel Hauck Sept. 8 (Bloomberg) — Stocks rose worldwide, driving the Standard & Poor’s 500 Index higher for a third day, as gains in metals boosted the profit outlook for raw-material companies. Gold climbed above $1,000 an ounce as the dollar fell. Alcoa Inc. and Chevron Corp. advanced more than 2 percent as bullion reached an 18-month high, copper added 3.4 percent and oil surged 4.7 percent. General Electric Co. gained 4.7 percent after JPMorgan Chase & Co. recommended buying the shares, saying expectations for the company are too low. The S&P 500 rose 0.9 percent to 1,025.43 at 11 a.m. in New York. The Dow Jones Industrial Average climbed 60 points, or 0.6 percent, to 9,501.27. The MSCI World Index of equities in 23 developed nations advanced 1.3 percent after Credit Suisse Group AG said investors should favor stocks over bonds and cash. “The economy is growing again around the world, and that’s the big thing for stocks,” said Howard Ward , who helps oversee $21.3 billion as chief investment officer for growth equities at Gamco Investors Inc. in Rye, New York. “We’re looking at a global synchronized recovery right now. Industrial activity in most of the developed and developing world has turned up.” Stocks also rallied after the International Monetary Fund’s Dominique Strauss-Kahn said the crisis phase that toppled Lehman Brothers Holdings Inc. in September 2008 is “almost certainly behind us.” Metals jumped after Goldman Sachs Group Inc. raised its forecasts because of “increasing evidence of a stronger-than- anticipated recovery in global industrial activity.” Nine-Year Rally Gold futures rose to the highest price since March 2008, climbing 0.8 percent to $1,004.80 an ounce in New York. Bullion reached an intraday record of $1,033.90 18 months ago and is rallying for a ninth straight year. Copper advanced 3.7 percent to $2.9715 a pound in New York, gaining for a fourth straight day. Lead rallied 6.6 percent to the highest price since May 2008 in London. Copper for delivery in three months will surge 21 percent in London through the end of 2010, Goldman Sachs analyst Jeffrey Currie wrote in a report today. Prices of the metal have more than doubled this year. “The fact copper is up so much says recovery is ongoing and on track,” said Dan Greenhaus , chief economic strategist at Miller Tabak & Co. in New York. “Weakness in the dollar is helping to boost gold, copper, oil and other commodities because a weaker dollar means commodities, which are priced in dollars, become more expensive.” Dollar Weakens Oil futures rose 4.7 percent to $71.18 in New York as the weaker dollar increased demand for commodities as a currency hedge. The Dollar Index , which tracks the currency against those of six major U.S. trading partners, fell 1.1 percent to 77.151. Ministers from the Organization of Petroleum Exporting Countries meet tomorrow in Vienna to set production targets. Saudi Arabian Oil Minister Ali al-Naimi said the market is in “good shape,” with price between $68 and $73 a barrel satisfactory for both consumers and producers. Alcoa rose 2.3 percent to $12.46, while Chevron added 1.9 percent to $70.24 as raw-material and energy stocks in the S&P 500 rallied 1.2 percent and 2.1 percent, respectively. Allegheny Technologies Inc. rose 5.7 percent to $31.48 for the third- biggest gain in the S&P 500 after the specialty-metals producer signed a 10-year supply agreement with Rolls-Royce Plc that may generate as much as $1 billion of revenue. Credit Suisse forecast gains in equity indexes worldwide ranging from 12 percent for Europe to 23 percent for Japan through mid-2010 as the economy recovers. ‘Best Phase’ “This is the best phase of the economic cycle,” a team of Credit Suisse strategists led by London-based Andrew Garthwaite wrote in a note today. “Many economic and financial variables are back to pre-Lehman levels.” GE climbed 4.7 percent to $14.52. The largest locomotive maker and owner of NBC Universal was raised to “overweight” from “neutral” at JPMorgan, which cited the company’s potential for an “upside surprise.” Kraft Foods Inc. fell 4.8 percent to $26.76. The second- largest food company said it will pursue a takeover of Cadbury Plc after the maker of Trident gum and Dairy Milk chocolate rejected a 10.2 billion-pound ($16.7 billion) bid. Cadbury , which soared 38 percent in London yesterday after Kraft’s announcement, surged 40 percent in the U.S., where markets were closed yesterday for the Labor Day holiday. The MSCI Emerging Markets Index added 1 percent, climbing for a fourth straight day. Russia’s Micex index jumped 3.3 percent as oil rose. Russia is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse in 1991. China’s Shanghai Composite Index gained 1.7 percent. Global Growth “Confidence is growing that we’ve entered a period of global growth again,” said Ken Brusda , who manages $700 million at North Star Asset Management in Menasha, Wisconsin. “Rising global demand is going to increase prices, and also the weak dollar contributes to that as well.” American International Group Inc. dropped the most in the S&P 500, sliding 7.8 percent to $36.92. The insurer bailed out by the U.S. government was cut to “underperform” from “neutral” at Credit Suisse following a surge in the stock. AIG rallied 245 percent last month. To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Daniel Hauck in London at dhauck1@bloomberg.net .

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U.S. Stocks Advance a Third Day as Gold Tops $1,000 an Ounce, Dollar Falls

September 8, 2009

By Jeff Kearns and Daniel Hauck Sept. 8 (Bloomberg) — Stocks rose worldwide, driving the Standard & Poor’s 500 Index higher for a third day, as gains in metals boosted the profit outlook for raw-material companies. Gold climbed above $1,000 an ounce as the dollar fell. Alcoa Inc. and Chevron Corp. advanced more than 2 percent as bullion reached an 18-month high, copper added 3.4 percent and oil surged 4.7 percent. General Electric Co. gained 4.7 percent after JPMorgan Chase & Co. recommended buying the shares, saying expectations for the company are too low. The S&P 500 rose 0.9 percent to 1,025.43 at 11 a.m. in New York. The Dow Jones Industrial Average climbed 60 points, or 0.6 percent, to 9,501.27. The MSCI World Index of equities in 23 developed nations advanced 1.3 percent after Credit Suisse Group AG said investors should favor stocks over bonds and cash. “The economy is growing again around the world, and that’s the big thing for stocks,” said Howard Ward , who helps oversee $21.3 billion as chief investment officer for growth equities at Gamco Investors Inc. in Rye, New York. “We’re looking at a global synchronized recovery right now. Industrial activity in most of the developed and developing world has turned up.” Stocks also rallied after the International Monetary Fund’s Dominique Strauss-Kahn said the crisis phase that toppled Lehman Brothers Holdings Inc. in September 2008 is “almost certainly behind us.” Metals jumped after Goldman Sachs Group Inc. raised its forecasts because of “increasing evidence of a stronger-than- anticipated recovery in global industrial activity.” Nine-Year Rally Gold futures rose to the highest price since March 2008, climbing 0.8 percent to $1,004.80 an ounce in New York. Bullion reached an intraday record of $1,033.90 18 months ago and is rallying for a ninth straight year. Copper advanced 3.7 percent to $2.9715 a pound in New York, gaining for a fourth straight day. Lead rallied 6.6 percent to the highest price since May 2008 in London. Copper for delivery in three months will surge 21 percent in London through the end of 2010, Goldman Sachs analyst Jeffrey Currie wrote in a report today. Prices of the metal have more than doubled this year. “The fact copper is up so much says recovery is ongoing and on track,” said Dan Greenhaus , chief economic strategist at Miller Tabak & Co. in New York. “Weakness in the dollar is helping to boost gold, copper, oil and other commodities because a weaker dollar means commodities, which are priced in dollars, become more expensive.” Dollar Weakens Oil futures rose 4.7 percent to $71.18 in New York as the weaker dollar increased demand for commodities as a currency hedge. The Dollar Index , which tracks the currency against those of six major U.S. trading partners, fell 1.1 percent to 77.151. Ministers from the Organization of Petroleum Exporting Countries meet tomorrow in Vienna to set production targets. Saudi Arabian Oil Minister Ali al-Naimi said the market is in “good shape,” with price between $68 and $73 a barrel satisfactory for both consumers and producers. Alcoa rose 2.3 percent to $12.46, while Chevron added 1.9 percent to $70.24 as raw-material and energy stocks in the S&P 500 rallied 1.2 percent and 2.1 percent, respectively. Allegheny Technologies Inc. rose 5.7 percent to $31.48 for the third- biggest gain in the S&P 500 after the specialty-metals producer signed a 10-year supply agreement with Rolls-Royce Plc that may generate as much as $1 billion of revenue. Credit Suisse forecast gains in equity indexes worldwide ranging from 12 percent for Europe to 23 percent for Japan through mid-2010 as the economy recovers. ‘Best Phase’ “This is the best phase of the economic cycle,” a team of Credit Suisse strategists led by London-based Andrew Garthwaite wrote in a note today. “Many economic and financial variables are back to pre-Lehman levels.” GE climbed 4.7 percent to $14.52. The largest locomotive maker and owner of NBC Universal was raised to “overweight” from “neutral” at JPMorgan, which cited the company’s potential for an “upside surprise.” Kraft Foods Inc. fell 4.8 percent to $26.76. The second- largest food company said it will pursue a takeover of Cadbury Plc after the maker of Trident gum and Dairy Milk chocolate rejected a 10.2 billion-pound ($16.7 billion) bid. Cadbury , which soared 38 percent in London yesterday after Kraft’s announcement, surged 40 percent in the U.S., where markets were closed yesterday for the Labor Day holiday. The MSCI Emerging Markets Index added 1 percent, climbing for a fourth straight day. Russia’s Micex index jumped 3.3 percent as oil rose. Russia is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse in 1991. China’s Shanghai Composite Index gained 1.7 percent. Global Growth “Confidence is growing that we’ve entered a period of global growth again,” said Ken Brusda , who manages $700 million at North Star Asset Management in Menasha, Wisconsin. “Rising global demand is going to increase prices, and also the weak dollar contributes to that as well.” American International Group Inc. dropped the most in the S&P 500, sliding 7.8 percent to $36.92. The insurer bailed out by the U.S. government was cut to “underperform” from “neutral” at Credit Suisse following a surge in the stock. AIG rallied 245 percent last month. To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Daniel Hauck in London at dhauck1@bloomberg.net .

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Supertankers May Halt Oil Trading Amid Unprofitable Leases, Frontline Says

September 4, 2009

By Alaric Nightingale Sept. 4 (Bloomberg) — Supertanker owners may start refusing cargoes within the next three months unless rates return to a profitable level, said Frontline Ltd., the biggest operator of the ships which carry almost half the world’s oil. Ship owners are contributing $942 a day toward fuel costs to ship Middle East crude , according to the London-based Baltic Exchange. Rates have been below operating costs since July. Should the losses persist, some owners may choose to idle their ships, according to Jens Martin Jensen , Singapore-based chief executive officer of Frontline’s management unit. “If you see another quarter, then I think owners have to do something,” Jensen said by phone today. “We are subsidizing oil companies.” The Organization of Petroleum Exporting Countries has cut output by 4 percent this year to 28.4 million barrels a day, according to Bloomberg estimates. Over the same period, the fleet of in-service supertankers has advanced 5.8 percent to 528 ships, according to Lloyd’s Register-Fairplay data on Bloomberg. The five-member Bloomberg Tanker Index , led by Frontline, dropped 19 percent this year, extending last year’s record 49 percent slump. Frontline rose 3 kroner, or 2.3 percent, to 132.50 kroner in Oslo, valuing the company at 10.3 billion kroner ($1.7 billion). Returns for Owners Rental rates on the industry benchmark Saudi Arabia to Japan route climbed 0.6 percent to 30.69 Worldscale points today, their first advance in 11 sessions, according to the London-based Baltic Exchange. Returns for owners on eastern and western routes from the Middle East reached this year’s peak of $64,146 a day in January. The vessels need $11,603 a day to pay insurance, crew, repairs and other running costs, according to London-based Drewry Shipping Consultants Ltd. Frontline said its largest carriers needed to earn an average of $31,900 a day to break even in the second quarter, once finance costs were taken into account. They made an average of $38,400, including vessels on longer-term rentals. The slump is triggering an acceleration in the demolition of aging carriers, according to Cumberland, Maryland-based Global Marketing Systems Inc., the world’s largest cash buyer of obsolete vessels. The number of supertankers sold for scrap may reach a six-year high, the company estimates. The drop in rental rates prompted A.P. Moeller-Maersk A/S, Denmark’s biggest crude carrier, to seek revisions to orders for new tankers, Kristian Morch, chief operating officer of the company’s oil-shipping unit, said by phone today. The company sold $1.58 billion of stock this week to fund acquisitions in the oil and terminals businesses. Supertanker Owner Euronav NV , Belgium’s biggest owner of supertankers, plans to raise as much as $200 million to fund acquisitions of vessels and diversify its financing, the company said today. Frontline is sailing its carriers more slowly to conserve fuel, Jensen said. Frontline is sometimes “waiting days” for profitable cargoes, he said. Jensen declined to say whether Frontline would idle its own tankers. Doing so would make the vessels less attractive to hire when they return to service because they lose safety approvals from oil companies, he said. A “handful” of independent owners have already started to reject cargoes because rates are too low, London-based EA Gibson Shipbrokers Ltd., said in a report today. “If more owners refuse to play, then eventually some upward re-adjustment will develop,” Gibson said. Jensen denied an earlier report that Frontline may remove a vessel from the market next week. To contact the reporters on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net

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Gold Rises Most Since April as Equity Decline Spurs Precious Metal Demand

September 2, 2009

By Nicholas Larkin Sept. 2 (Bloomberg) — Gold rose for a second day in New York and London as equity markets declined, increasing demand for the metal as an alternative investment. The MSCI World Index of shares fell for a third day, dropping as much as 0.9 percent, as a report today from ADP Employer Services showed companies in the U.S. cut an estimated 298,000 jobs in August, more than forecast by economists. That compares with a revised 360,000 decline in July. “With equity weakness still very much to the fore, a sustained push for that all-important psychological level of $1,000 an ounce and beyond on safe-haven demand seems likely in coming weeks,” GoldCore Ltd. , a brokerage in Dublin, said in a note today. Gold futures for December delivery gained $8, or 0.8 percent, to $964.50 an ounce on the New York Mercantile Exchange’s Comex division by 8:45 a.m. local time. Bullion for immediate delivery climbed 0.7 percent to $963.30 an ounce in London. The metal was unchanged at $955 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from yesterday’s afternoon fixing. “With a long weekend approaching and equity markets showing signs of fatigue, we could soon see the return of investment demand as players look to diversify portfolios,” James Moore , an analyst at TheBullionDesk.com in London, said in a report. The U.S. has a national holiday Sept. 7. Silver, Platinum Holdings in the SPDR Gold Trust , the biggest exchange- traded fund backed by the metal, were unchanged for a fifth day at 1,061.83 metric tons yesterday, data on the company’s Web site showed. Silver for December delivery added 0.1 percent to $15.08 an ounce in New York. Platinum for October delivery declined 1.5 percent to $1,209 an ounce, the lowest in a month. Palladium for December delivery slipped 2.4 percent to $282.50 an ounce. Silver holdings in the iShares Silver Trust , the biggest exchange-traded fund backed by the metal, fell 0.8 percent to 8,668.65 tons as of yesterday, according to the company’s Web site. Silver held in ETF Securities Ltd. ’s exchange-traded commodities rose 1.7 percent to a record 20.32 million ounces yesterday, the company’s Web site showed. ETF Securities’ palladium assets advanced 2.5 percent to a record 404,214 ounces. Platinum may average $1,350 an ounce next year because of “constrained” mine output and increased industrial production, London-based BNP Paribas SA analyst Anne-Laure Tremblay said in a report yesterday. The metal’s surplus may decline to 30,000 ounces in 2010 from 280,000 ounces this year, she said. To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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Companies in U.S. Reduced Payrolls by More-Than-Forecast 298,000, ADP Says

September 2, 2009

By Timothy R. Homan (Corrects first paragraph to say report is for August.) Sept. 2 (Bloomberg) — Companies eliminated more jobs than forecast in August, a private survey indicated today, signaling that employers have yet to gain confidence about a recovery from the deepest recession since the 1930s. The 298,000 drop followed a revised 360,000 decline the prior month that was smaller than previously estimated, according to figures from ADP Employer Services. Today’s figures underscore the danger that consumer spending, which accounts for 70 percent of the economy, may be slow to gain traction in coming months. The report comes two days before a Labor Department release forecast to show the U.S. unemployment rate rose to 9.5 percent in August. “Until the labor market turns, consumer spending and confidence will remain very weak,” Joseph Brusuelas , a director at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. Stock-index futures dropped and Treasuries erased losses after the ADP report. Contracts on the Standard & Poor’s 500 Index lost 0.4 percent to 992.50 at 8:25 a.m. in New York. Yields on benchmark 10-year notes were little changed at 3.36 percent. Labor Department The Labor Department’s payrolls report, due in two days, may show employers cut another 225,000 jobs in August and unemployment climbed from 9.4 percent in July, according to the median forecast in a Bloomberg News survey. The economy already has lost 6.7 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression. The ADP report was forecast to show a decline of 250,000 jobs, according to the median estimate of 32 economists in a Bloomberg survey. Projections ranged from decreases of 396,000 to 160,000. ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP. Employers announced 14 percent fewer job cuts in August than the year-earlier month, and 21 percent fewer on a month- to-month basis, according to a report today by Chicago-based placement firm Challenger, Gray & Christmas Inc. ADP Details Today’s ADP report showed a decrease of 152,000 workers in goods-producing industries including manufacturers and construction companies. Service providers cut 146,000 workers. Employment in construction fell by 73,000, while financial firms trimmed jobs by 19,000, ADP said, the 21st consecutive monthly drop for the industry. Companies employing more than 499 workers shrank their workforce by 60,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 116,000 jobs and small companies decreased payrolls by 122,000, ADP said. Announcements of staff reductions continued last week. Whirlpool Corp., the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce. Meanwhile, General Motors Co. last month called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production in part because of the government’s “cash for clunkers” trade-in program. The clunkers program, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. To contact the reporter on this story: Timothy R. Homan in Washington at Thoman1@bloomberg.net

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