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Switzerland Replaces the U.S. as Most Competitive Global Economy, WEF Says

September 8, 2009

By Simon Kennedy and Klaus Wille Sept. 8 (Bloomberg) — The U.S. was displaced by Switzerland as the world’s most-competitive economy after its financial markets were roiled by the worst crises since the Great Depression, the World Economic Forum said today. The U.S. fell to second position for the first time since the Geneva-based organization began its current index in 2004 as it lost marks for the sophistication of its markets and rising budget deficits. Switzerland was credited for its stability and ability to innovate. “A number of escalating weaknesses have taken their toll on the U.S. ranking this year,” the study of 133 countries ny the Geneva-based organization said. “Switzerland’s performance has remained relatively stable.” The loss of efficiency by the world’s largest economy is another obstacle to a fast recovery even as it begins to show signs of emerging from its deepest recession since World War II. Reduced confidence in its banking system after the collapse a year ago of Lehman Brothers Holdings Inc. meant the U.S. slid to ninth from 20th when ranked for the attributes of its markets. A measure of how easy access to finance is fell to 106th this year, close to Albania and Mali, from 40th last year, while a budget deficit now above $1 trillion pushed its grade for economic stability to 93rd from 66th. U.S. Faces Obstacles The U.S. economy still won marks for its flexible product and labor markets, research and development and technological advances. ‘These factors remain a driving force behind U.S. productivity and will support recovery from the current recession,” the forum said. The U.S. economy may be slow to pull out of its slump as data suggest obstacles to expansion remain. While the economy lost the fewest jobs this year in August, unemployment climbed to a 26-year high, a U.S. Labor Department report showed Sept. 5. Switzerland took the top spot after being ranked third in the world for business sophistication and second for its capacity to innovate. Its economy was ranked 17th for stability. Recent indicators show the Swiss economy is emerging from its worst recession in three decades. Gross domestic product contracted 0.3 percent in the second quarter from the previous three months, less than economists expected. Exports rose in July after falling for two months and investor confidence jumped to a three-year high in August. Returning to Growth “Some months ago, uncertainty was much higher and I expected worse” said Ursina Kubli , an economist at Bank Sarasin in Zurich. “But given these latest data, it looks as if the economy is stabilizing on a solid level. I expect the economy to expand again in the third quarter.” Singapore, Sweden and Denmark rounded out the top five, followed by Finland, Germany, Japan, Canada and the Netherlands. Among the other Group of Seven nations, the U.K. slipped one slot to 13th, France held at 16th and Italy rose a place to 48th, although remained below Barbados in 44th. China climbed one place to 29th, while India and Brazil also gained to 49th and 56th respectively. Russia fell 12 places to 63th because of concern about the government’s growing role in its economy and the independence of its justice system. In Latin America, Chile was the highest placed ranking 30th and Qatar outpaced its Middle East counterparts coming in at 22nd. Governments should be wary of not taking steps to fortify their economies even once the crisis passes, said Xavier Sala-i – Martin, an economics professor at Columbia University in New York, who helped write the report. The International Monetary Fund now expects the world economy to grow 2.9 percent next year rather than 2.5 percent it predicted in July. “It is critical that policy makers not lose sight of long- term competitiveness fundamentals amid short-term urgencies,” said Sala-i-Martin. “A competitiveness-supporting economic environment can help national economies to weather business cycle downturns.” To contact the reporters on this story: Simon Kennedy in Paris at skennedy4@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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Kuznetsova, Wozniacki, Tsonga Win as Day 2 of U.S. Open Begins

September 1, 2009

By Mason Levinson Sept. 1 (Bloomberg) — Former champion Svetlana Kuznetsova , Denmark’s Caroline Wozniacki and Frenchman Jo-Wilfried Tsonga each earned straight-set victories as the second day of the U.S. Open began. Kuznetsova, who in 2004 became the first Russian woman to win a U.S. Open singles title, beat Germany’s Julia Goerges 6-3, 6-2 in a first-round match on the Arthur Ashe Stadium court in Flushing Meadows, New York. Kuznetsova, 24, broke the 20-year-old Goerges’s serve five times and was broken twice herself in the 62-minute match. She’ll face either Thailand’s Tamarine Tanasugarn or Latvia’s Anastasija Sevastova in the second round. Tsonga, seeded seventh, beat American wild-card entry Chase Buchanan 6-0, 6-2, 6-1, winning 88 percent of his first serves, including eight aces. The 24-year-old Tsonga reached the third round in both of his previous appearances in the tennis season’s final Grand Slam tournament. He’ll face either Finland’s Jarkko Nieminen or Italy’s Fabio Fognini in the second round. Wozniacki, 19, the ninth-seeded woman, beat Kazakhstan’s Galina Voskoboeva 6-4, 6-0, winning seven break points while being broken three times in the 79-minute match. Wozniacki reached the fourth round of the U.S. Open a year ago. She’ll face Croatian Petra Martic in the next round. Later today on the Arthur Ashe Stadium court, top-seeded Dinara Safina of Russia begins her tournament against Australia’s Olivia Rogowska, and fourth-seeded Novak Djokovic of Serbia takes on Ivan Ljubicic of Croatia in men’s play. Tonight, Maria Sharapova , the 2006 champion from Russia, plays Bulgaria’s Tsvetana Pironkova and Britain’s Andy Murray , the No. 2 seeded man, faces Latvia’s Ernests Gulbis. To contact the reporter on this story: Mason Levinson in New York at mlevinson@bloomberg.net .

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World Economy May Have Bottomed, Demand Improving, Frontline’s Jensen Says

August 30, 2009

By Alistair Holloway Aug. 28 (Bloomberg) — The world economy may be improving from its worst slump in six decades, bolstering demand, said Jens Martin Jensen , head of the management unit of Frontline Ltd., the world’s biggest operator of supertankers. The company , based in Hamilton, Bermuda, posted a better- than-expected 91 percent drop in second-quarter profit today. “On the demand side, maybe the world economy has hit the bottom and things are starting to improve,” Jensen said by phone today from Oslo. European confidence in the economic outlook increased twice as much as economists forecast in August, a European Commission report showed today. The U.S. economy, the world’s biggest oil user, shrank less than expected in the second quarter, and France and Germany returned to growth in the same period. The Baltic Dirty Tanker Index , an overall measure of crude oil shipping costs, including rates for tankers smaller than Frontline’s, averaged 527 points in the second quarter, the lowest since at least the fourth quarter of 2001, according to the London-based Baltic Exchange. The Organization of Petroleum Exporting Countries pumped an average of 13 percent less oil than in the same quarter last year, while the carrying capacity of the fleet expanded 5.6 percent, according to Lloyd’s Register-Fairplay data. Global oil demand fell 3.1 percent to 83.7 million barrels a day from a year earlier, according to the Paris-based International Energy Agency. Demand will drop 2.7 percent to 83.9 million barrels a day this year, according to the adviser. Saudi Arabian Crude On the benchmark route for supertankers that deliver 2 million-barrel cargoes of Saudi Arabian crude to Japan, earnings averaged $16,818 a day, according to the Baltic Exchange. They averaged $40,393 in the first quarter. Rates have probably fallen enough to spur owners of single- hulled tankers to scrap their vessels, Jensen said. The tankers will be barred by International Maritime Organization regulations starting next year, with some exemptions until 2015. There are 566 single-hull tankers with a combined carrying capacity of 57.5 million deadweight tons, according to Clarkson Plc, the world’s biggest shipbroker. The combined carrying capacity of the crude-oil tanker fleet is at 321 million tons, according to Lloyd’s Register-Fairplay data. Rates also continue to benefit from demand for tankers for storage, Frontline said. About 50 supertankers are being used for storage at sea, compared with about 55 to 60 at the start of the second quarter, Jensen said. That’s equal to about 9 percent of the global fleet, restricting supply and buttressing rates. Oil Contango By storing oil and oil products at sea, traders are seeking to profit from contango, where longer-dated contracts are more expensive than near-term supply. That may allow traders to buy consignments now, store them and sell them at a profit later, assuming storage, financing and insurance costs are exceeded. Frontline closed 1.9 percent lower at 141.75 kroner in Oslo, valuing the company at 11 billion kroner ($1.8 billion.) The stock slumped 29 percent this year. Second-quarter net income fell to $27.8 million, or 36 cents a share, from $318.4 million, or $4.25, a year earlier. Frontline joins rivals including New York-based Overseas Shipholding Group Inc. , the biggest U.S.-based owner, and Antwerp-based Euronav NV in reporting falling earnings. A.P. Moeller-Maersk A/S , Denmark’s largest owner of crude oil carriers, said Aug. 21 that lease rates for crude oil tankers have dropped to a record because of reduced cargo supply. To contact the reporters on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net Alistair Holloway in London at aholloway1@bloomberg.net

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European Stocks Fall for Second Day; Lloyds, Danske Bank, Natixis Decline

August 11, 2009

By Adam Haigh Aug. 11 (Bloomberg) — European stocks fell for a second day, erasing an earlier advance for the Dow Jones Stoxx 600 Index, as banks retreated. Lloyds Banking Group Plc plummeted 9.4 percent as the Financial Times reported the U.K. lender may face government resistance to its tentative plans to raise approximately 15 billion pounds ($25 billion) in a rights offer. Danske Bank A/S sank 2.1 percent after posting an unexpected net loss. The Stoxx 600 slid 0.4 percent to 228.61 as of 11:38 a.m. in London. The gauge has soared 45 percent since March 9 as companies from GlaxoSmithKline Plc to Intel Corp. reported better-than-estimated results. The measure is valued at 40.1 times the profits of its companies, the highest level since September 2003, weekly data compiled by Bloomberg show. Standard & Poor’s 500 Index futures expiring in September slipped 0.3 percent. Federal Reserve chairman Ben S. Bernanke and his four Federal Open Market Committee colleagues, gathering today and tomorrow in Washington, may acknowledge an improvement in the economic outlook while maintaining a pledge to buy as much as $1.75 trillion of bonds, economists said. Lloyds slid 9.4 percent to 88.72 pence. The bank may face resistance to its tentative rights offer plan to reduce reliance on the government and U.K.’s toxic asset protection program, the Financial Times reported, citing unidentified people familiar with the matter. Danske Bank Danske Bank slid 2.1 percent to 115.75 kroner as Denmark’s largest lender said it expects impairment charges to remain high this year after a surge in loan losses at home and in Ireland resulted in a second-quarter loss. Natixis SA slumped 15 percent to 2.13 euros after the Wall Street Journal said there are no plans to de-list any of the lender’s securities from the market. Adecco SA , the world’s largest supplier of temporary workers, fell 4.3 percent to 50.6 Swiss francs after reporting a net loss of 147 million euros ($208 million) for the second quarter. Analysts surveyed by Bloomberg had predicted net income of 32.8 million euros. Per-share earnings at companies in the Stoxx 600 that reported results since July 8 have slumped 36 percent, while more than half have topped analysts’ projections, according to data compiled by Bloomberg. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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Aviva, Hannover Re Lead Insurers Higher as Profits Beat Analyst Estimates

August 6, 2009

By Kevin Crowley and Jon Menon Aug. 6 (Bloomberg) — Aviva Plc , the U.K.’s second-biggest insurer by market value, and Germany’s Hannover Re led insurance stocks higher after earnings beat analysts’ estimates. Aviva said first-half operating profit rose 12 percent to 1.69 billion pounds ($2.9 billion). Hannover Re , Germany’s second-biggest reinsurer, said profit doubled in the second quarter, surpassing analyst estimates. Hannover Re’s income from investments also doubled as it booked fewer writedowns, while London-based Aviva said investment losses eased in the first half. Insurers have been forced to boost capital reserves to combat losses on investments ranging from corporate bonds to commercial property. “The trouble with the sector has been you get companies which are opaque, highly leveraged to financial markets and have unclear accounting,” said Chris White , who helps manage 60 billion pounds at Threadneedle Asset Management in London. “As the market recovers and gains confidence, the market will gain more trust in the industry.” Aviva led the Bloomberg Europe 500 Insurance Index higher, increasing 5.9 percent to 377.3 pence as of 10:38 a.m. in London trading. Hannover Re rose 5.4 percent to 29.49 euros in Frankfurt, lifting its market value to 3.56 billion euros. Lower Investment Losses Aviva’s operating profit, measured on a market-consistent embedded value basis, beat the 1.23 billion-pound median estimate of five analysts surveyed by Bloomberg. “We haven’t got the investment losses this year that we had last year,” Aviva Finance Director Philip Scott said today. Aviva increased profit at its U.K. life and general insurance divisions by reducing the amount paid in commissions to salesmen. The insurer said it’s “on track” to cut expenses by 100 million pounds by the end of the year as it reduces staff and moves jobs to cheaper overseas locations. The company cut its first-half dividend by 31 percent to 9 pence a share. Hannover Re’s net income jumped to 202.9 million euros ($292.3 million) from 101 million euros a year earlier. Profit exceeded the median analyst estimate of 154 million euros. Income from investments doubled to 371 million euros, the Hanover, Germany-based company said. Income the previous year was eroded by writedowns on equity investments. The company said in November it will no longer be affected by stock market swings after scaling back its equity holdings to a “minimal” size. Better Than Forecast The reinsurer now expects to beat its own profit forecast of about 600 million euros in 2009 if capital markets remain at current levels, Chief Financial Officer Roland Vogel said in a telephone interview today. RSA Insurance Group Plc, the U.K.’s biggest non-life insurer, posted a decline in earnings as claims increased and investment returns shrank. Operating profit dropped to 392 million pounds, still beating the 374 million-pound median estimate of five analysts surveyed by Bloomberg. Chief Executive Officer Andy Haste cut 1,200 jobs in February and pulled less profitable products including coverage for some U.K. commercial fleets and shipyards in Denmark to trim costs as the recession hurts demand for insurance. The insurer raised its first-half dividend by 7 percent to 2.92 pence. “The numbers are pretty good, with a better-than-expected investment result and an increase in the dividend, which will compare well with Aviva,” said Thomas Dorner , an analyst at Oriel Securities Ltd. in London with a “hold” rating on RSA. Zurich Financial Services AG, Switzerland’s largest insurer, reported a 29 percent decline in second-quarter profit because of lower general insurance earnings and investment losses. Net income fell to $892 million from $1.25 billion a year earlier, the Zurich-based company said. Analysts surveyed by Bloomberg had estimated a profit of about $902 million. The shares climbed 2.6 percent to 221.4 Swiss francs in Zurich trading, valuing the insurer at about 31 billion francs. “Overall, it looks good,” said Stefan Schuermann , a Zurich-based analyst with Vontobel Holding AG. For Related News and Information: Top Finance news: TOPFIN Aviva Plc earnings: AV/ LN TCNI ERN Aviva Plc earnings analysis: AV/ LN FA16

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NATO Refuses to Set Afghanistan Deadline, Says Alliance Will Beat Taliban

August 3, 2009

By James G.

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