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Merkel Pushes Extra EU Rules for Markets, Seeks to Widen Short-Selling Ban

by on May 19, 2010

By Tony Czuczka May 19 (Bloomberg) — German Chancellor Angela Merkel laid out proposals to gain control over “destructive” financial markets, as her government seeks to extend a ban on naked short- selling across Europe. Merkel, opening a parliamentary debate on Germany’s contribution to a $1 trillion bailout to backstop the euro, said faster budget cuts, tougher penalties for countries that flout the rules and the orderly insolvency of euro-region states are among the measures Germany will put to European Union partners on May 21. “The lack of rules and limits can make behavior in financial markets driven purely by the profit motive destructive and lead to an existential threat to financial stability in Europe and even the world,” Merkel told lawmakers in Berlin today. “The market alone won’t correct these mistakes.” Merkel’s coalition is seeking to build momentum on market regulation amid public opposition to Germany’s share of the Greek and euro-region bailouts. Germany banned naked short- selling and speculation on European government bonds with credit-default swaps today in an effort to calm financial markets, sparking investor anxiety about increasing regulation. The euro reached the weakest level in more than four years, falling as much as 0.5 percent to $1.2144. Merkel said Germany will lobby governments to introduce a tax on financial markets, and for ratings companies to come under European supervision so governments regain “primacy” over markets. Germany will act alone where necessary, she said, citing the short-selling ban by financial regulator BaFin. “All of this will stay in effect until another solution has been found at the European level,” she said. The euro is at risk and Europe may be facing its greatest challenge since the founding of the European Union, with “incalculable” consequences if leaders fail to act, Merkel said. To contact the reporters on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net .

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Asian Stocks Enter Correction, Euro Drops on Concern Recovery Will Falter

by on May 18, 2010

By Linus Chua and Weiyi Lim May 18 (Bloomberg) — Asian stocks fell, dragging the MSCI Asia Pacific Index into a so-called correction, on speculation efforts in Europe to curb government debt will curtail growth. The euro fell toward a four-year low ahead of a German report forecast to show investor confidence deteriorated. The MSCI Asia Pacific Index lost 0.4 percent to 116.25 as of 3:43 p.m. in Tokyo, briefly slipping more than 10 percent from its high on April 15 this year. Europe’s single currency weakened to $1.2347 in Tokyo from $1.2395 in New York yesterday. Euro Stoxx 50 futures rose 1.3 percent, while those on the Standard & Poor’s 500 Index gained 0.2 percent after the gauge rebounded from a 1.8 percent plunge to end 0.1 percent higher. Europe’s finance ministers are struggling to convince investors that budget cuts across the continent won’t tip the region back into recession. The ZEW Center for European Economic Research’s study of German investor sentiment probably fell by the most in 19 months, according to the median forecast of 35 economists in a Bloomberg News survey. “The European debt fallout provided the trigger” for the correction, said Nader Naeimi , a Sydney-based senior strategist with AMP Capital Investors Ltd., which oversees $90 billion globally. “This is probably the first severe correction since March 2009 and this will likely last longer than previous corrections. I expect the dust to settle somewhere around October.” Almost two stocks fell for every one that gained on the MSCI Asia Pacific Index , extending the measure’s 2.8 percent slump yesterday, the biggest drop in almost six months. Japan, Korea Japan’s Nikkei 225 Stock Average gained less than 0.1 percent, after falling as much as 0.4 percent. South Korea’s Kospi index and Malaysia’s FTSE Bursa Malaysia KLCI Index lost 0.5 percent. U.S. stocks rose yesterday, with the Dow Jones Industrial Average reversing a 184-point drop, as the euro’s rebound bolstered optimism that the currency will weather the region’s debt crisis. Inpex Corp., Japan’s largest oil and gas explorer, fell 2.5 percent. Mitsubishi Corp. , Japan’s biggest commodities trader, lost 1.6 percent. Korea Zinc Co., the world’s second-biggest zinc smelter, lost 6.2 percent in Seoul. The euro weakened against 14 of its 16 major counterparts, falling as much as 1 percent to $1.2235, the lowest level since April 18, 2006. It weakened to 113.78 yen from 114.77 yen yesterday, when it reached 112.46 yen, the least since May 6. Greek Debt European finance ministers said Greece’s debt crisis won’t unleash a continent-wide austerity drive with the potential to tip the economy back into a recession and further undercut the euro. Only high-deficit countries including Spain and Portugal will be ordered to make additional deficit cuts, while budget policies will remain untouched in better-off nations such as Germany and Finland. “Some of the austerity measures that are going to be put in place will see euro-zone growth crimped and it was already looking fairly weak,” said Mike Jones , a currency strategist at Bank of New Zealand Ltd. in Wellington. “We’ll probably see the euro slide continue in coming sessions, perhaps toward $1.20.” Australia’s dollar approached a three-month low after minutes of the central bank’s May 4 meeting damped expectations for continued interest rate increases. The currency declined 0.5 percent to 87.16 U.S. cents from yesterday when it touched 86.86 cents, the least since Feb. 9. Copper for three-month delivery advanced to $6,560 per metric ton. The metal plunged 6.6 percent yesterday, the most since January 2009. Crude oil rose 0.7 percent to $70.59 a barrel in New York, snapping five days of declines, as some investors took the view yesterday’s drop below $70 a barrel made the commodity attractive to buy. Bond risk in Thailand fell as the government engaged protesters in cease-fire talks after extending a deadline for women and children to leave an area where gun battles have taken place. The cost of credit-default swaps insuring Thai government debt from default lost 9 basis points to 156 basis points, halting a three-day climb, according to Royal Bank of Scotland Group Plc prices. To contact the reporters on this story: Linus Chua in at lchua@bloomberg.net ; Weiyi Lim at wlim26@bloomberg.net

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Asian Stocks Enter Correction, Euro Drops on Concern Recovery Will Falter

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U.S. Stocks Erase Losses on Daimler Results, Divided SEC Vote on Goldman

April 19, 2010

By Rita Nazareth April 19 (Bloomberg) — U.S. stocks erased losses as Daimler AG reported better-than-estimated results and two people with knowledge of the vote said the Securities and Exchange Commission did not unanimously approve pursuing a case against Goldman Sachs Group Inc. Goldman Sachs, which fell as much as 3.6 percent in early trading, climbed 0.4 percent after the people with knowledge of the matter said the SEC voted 3-2 along party lines to approve a case against the most profitable Wall Street firm in history. Citigroup Inc. jumped 4.8 percent after first-quarter earnings more than doubled. Ford Motor Co. rallied 1.8 percent as Daimler posted preliminary profit of 1.2 billion euros ($1.62 billion). “The market is rallying because Goldman Sachs is up after two of the five voting SEC members didn’t want to sue Goldman,” said Peter Boockvar , equity strategist at Miller Tabak & Co. in New York. “That shows the committee was splintered and maybe helps Goldman’s case.” The Standard & Poor’s 500 Index increased less than 0.1 percent to 1,192.43 at 2:53 p.m. in New York after falling as much as 0.7 percent earlier. The Dow Jones Industrial Average rose 39.98 points, or 0.4 percent, to 11,058.64. The S&P 500 tumbled 1.6 percent on April 16, the most since Feb. 4, after the SEC’s suit against Goldman Sachs spurred concern fallout from the financial crisis isn’t over. Goldman Sachs sank 13 percent that day, its biggest plunge in more than a year, after the SEC sued the bank and one of its vice presidents for fraud related to collateralized debt obligations. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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U.S. Stocks Rise as Economic Data, Earnings Offset Sovereign-Debt Concern

March 30, 2010

By Rita Nazareth March 30 (Bloomberg) — U.S. stocks rose as an improved outlook for industrial companies and better-than-estimated data on consumer confidence and home prices overshadowed concern government deficits will derail the economy recovery. 3M Co. rallied 3.5 percent as Morgan Stanley said profit may top estimates after Danaher Corp. boosted its earnings forecast, sending the maker of Craftsman tools shares up 4.6 percent. Home Depot Inc. and Lowe’s Cos. climbed as the S&P/Case-Shiller index of home prices in 20 U.S. cities and the Conference Board’s confidence gauge topped economists’ estimates. The Standard & Poor’s 500 Index increased less than 0.1 percent to 1,173.73 at 3:12 p.m. in New York after falling as much as 0.4 percent. The Dow Jones Industrial Average increased 13.3 points, or 0.1 percent, to 10,909.16. About 11 stocks rose for every 10 that fell on U.S. stock exchanges. “We’re definitely off the bottom,” said Michael Mullaney , who helps manage $9 billion at Fiduciary Trust Co. in Boston. “There’s improvement in confidence and sentiment. People seem to be more comfortable about spending again. We’ll continue to see strength in stocks.” Benchmark indexes fluctuated earlier after Standard & Poor’s cut Iceland’s credit rating and Greece failed to sell half the 12-year bonds it offered, reigniting concern governments around the world struggle to finance growing budget deficits. The 20-city home-price index unexpectedly climbed 0.3 percent and the Conference Board’s sentiment gauge climbed to 52.5 in March from 46.4 in February. The Dow average rose to an 18-month high yesterday after reports showed Americans spent more for a fifth month and European confidence in the economic outlook improved. First-Quarter Rally The S&P 500 has rallied for the last four weeks, heading for a fourth straight quarterly advance, on speculation the economy is recovering from the worst contraction since the Great Depression. The benchmark index for U.S. stocks has climbed 5.3 percent since Dec. 31, its best first-quarter rally since 1998. Traders attributed part of the market’s gains today and yesterday to “window dressing,” in which investors buy shares of the best-performing companies at the end of the quarter to shore up their portfolios. “It’s just the end of the quarter,” said Mark Bronzo , an Irvington, New York-based money manager at Security Global Investors, which oversees $21 billion. “We’ve had a decent quarter so it’s probably a little bit of window dressing. The economic numbers continue to be a little better and today’s numbers were not an exception.” U.S. Treasury Secretary Timothy F. Geithner said U.S. employers soon may start hiring again after weathering the worst recession since the Great Depression. “The economy is getting stronger,” Geithner said yesterday in an interview on CNBC. “We’re probably just on the verge now of what we think will be a sustained period of job creation finally.” To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net .

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Stocks in U.S. Gain on EU Pledge to Help Greece; Philip Morris Shares Rise

February 11, 2010

By Rita Nazareth Feb. 11 (Bloomberg) — U.S. stocks rose to the highest level in a week after European leaders pledged to aid Greece and Philip Morris International Inc. announced a $12 billion share buyback. Philip Morris International added 3.4 percent to $48.41, reversing a 1.6 percent retreat. Freeport-McMoRan Copper & Gold Inc. and Exxon Mobil Corp. led gains among materials and fuel producers as base metals and oil climbed in New York trading. Allegheny Energy Inc. jumped 10 percent after FirstEnergy Corp. said it would buy the utility for $4.7 billion. The Standard & Poor’s 500 Index rose 0.7 percent to 1,075.58 at 11:49 a.m. in New York after falling as much as 0.7 percent. The Dow Jones Industrial Average advanced 84.19 points, or 0.8 percent, to 10,122.57. European leaders ordered Greece to get the group’s highest budget deficit under control and said they were prepared to take “determined” action to staunch the worst crisis in the euro’s 11-year history. The accord left open how the European Union would respond to a fresh wave of speculative attacks against Greece or countries such as Spain and Portugal, which are also struggling to cut their budget deficits. “The recent news on Greece has been very encouraging,” said Peter Jankovskis , who helps manage about $1.7 billion as co- chief investment officer at Oakbrook Investments in Lisle, Illinois. “Investors are growing more optimistic on their accord and more confident that the situation won’t have spillover effects to the U.S.” Aiding Stability Spanish Prime Minister Jose Luis Rodriguez Zapatero said the EU’s agreement brought stability. He spoke at a news conference in Brussels today. Luxembourg Prime Minister Jean- Claude Juncker , who heads the panel of euro-region finance ministers, said all euro nations are ready to help Greece. EU officials reached an agreement to deal with Greece’s debt crisis, European Commission President Jose Barroso said. “There is an accord, the presidency will announce it,” Barroso told reporters before an EU summit in Brussels today. Speculation that Greece and nations such as Spain and Portugal are unable to repay their debt caused stocks to plunge on Feb. 4, driving the S&P 500 down 3.1 percent in its biggest drop since April. Investors bet that defaults would end the economic recovery that began almost a year ago. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net .

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Kirin Scraps Suntory Takeover, Balking at Brewery’s $10 Billion Price Tag

February 7, 2010

By Naoko Fujimura Feb. 8 (Bloomberg) — Kirin Holdings Co. , Japan’s largest beverage company, ended talks to buy Suntory Holdings Ltd. that would have created the world’s fifth-biggest foodmaker after balking at a $10 billion asking price. Suntory President Nobutada Saji and other members of the founding family had been seeking a stake of at least 33.4 percent in the merged company, which would have given them veto power over major decisions, including takeovers. The companies started talks in July as a declining population and stagnant economy sapped demand for their products at home. “Kirin has been negotiating on the premise that the new entity would be managed as a listed company in order to ensure appropriate management independence,” the Tokyo-based brewer said in a statement today. Kirin shares extended their decline after the announcement, falling as much as 6.9 percent. The stock traded 4.9 percent lower at 1,372 yen as of 12:44 p.m. in Tokyo. Suntory wanted about 0.9 percent of a share for each Kirin share in a new holding company, a Suntory executive, who declined to provide his name, told reporters in Tokyo today. That would have valued closely held Suntory at 892 billion yen ($10 billion) based on Kirin’s last closing price. “It would have been difficult to create a new company as there were differences in opinions, including the merger ratio,” Suntory said in a faxed statement. Uniting the century-old beverage makers would have created a company with sales of $42.7 billion, surpassing Coca-Cola Co. ’s $31.9 billion and placing it behind Nestle SA , Unilever PLC, Kraft Foods Inc. and PepsiCo Inc. Japanese food and beverage makers have been expanding overseas to reduce their reliance on a population that’s forecast to shrink 10 percent by 2030. Overseas Expansion Kirin last year agreed to pay A$3.5 billion ($3 billion) to take full ownership of Lion Nathan Ltd., Australia’s second- largest brewer. It also bought almost half of San Miguel Brewery Inc. , partly funded by the sale of its holding in the Philippine brewer’s parent San Miguel Corp. Suntory purchased European drinkmaker Orangina Schweppes from Blackstone Group LP and Lion Capital LLP in November for an undisclosed sum, and Groupe Danone SA’s Australia and New Zealand drinks business Frucor for more than 600 million euros ($819 million) in 2008. Kirin ’s domestic beer sales dropped 0.9 percent by volume last year and Japan soft-drink sales plunged 7 percent. The brewer of Ichiban Shibori and Kirin Lager overtook Asahi Breweries Ltd. last year in Japanese beer sales for the first time in nine years. Suntory sells Brand’s health food and is the Japanese partner of Haagen-Dazs ice cream. Suntory is 89 percent owned by members of the founding family. Saji’s grandfather, Shinjiro Torii , started the company in 1899 and began building Japan’s first whiskey distillery in Osaka prefecture in 1923. To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

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KB Financial’s Chairman Offers to Quit as Korea Bans Him From Second Term

September 22, 2009

By Bomi Lim Sept. 23 (Bloomberg) — KB Financial Group Inc. Chairman Hwang Young Key offered to resign after South Korean regulators barred him from seeking a second term for incurring investment losses at a rival company he led. Hwang should be punished for his role in 1.6 trillion won ($1.3 billion) of writedowns and charges on collateralized debt obligations and credit-default swaps at Woori Finance Holdings Co. ’s banking unit in late 2007 and 2008, the Financial Services Commission ruled on Sept. 10. He left state-owned Woori in March 2007 and joined KB Financial a year ago. “It is my long-held belief that I shouldn’t let my problems affect the organization’s growth and development,” Hwang said today in an e-mailed statement, adding it is “regrettable” that regulators didn’t take into account his defense arguments. Hwang’s resignation offer comes amid growing calls for stricter governance of bankers whose risk-taking triggered a global recession and required taxpayer-funded bailouts. Hwang today raised concerns that his case may dampen investment sentiment in South Korea’s financial industry. “It is my earnest desire that my penalty doesn’t impede the development of South Korea’s financial industry, which should thrive on the spirit of challenge and creativity,” Hwang, 56, said in the statement. Hwang also offered to step down from KB Financial’s board. Board Meeting The board may discuss Hwang’s resignation at a meeting on Sept. 25, a company official said, declining to be named because the plan isn’t finalized. If the board accepts the resignation, Hwang is likely to leave his post by the end of this month, the official said. KB Financial shares rose 0.5 percent to 60,800 won as of 12:55 p.m. in Seoul trading, after falling as much as 0.7 percent before Hwang’s announcement. Seoul-based KB Financial controls South Korea’s largest lender, Kookmin Bank. Woori Bank has been under a performance review by state-run Korea Deposit Insurance Corp. after posting a fourth-quarter loss, its first in almost five years. Korea Deposit owns a 73 percent stake in Seoul-based Woori Finance . National Pension Service President Park Hae Choon , former chief executive officer of Woori Bank, offered to resign on Sept. 11 after receiving a “warning” order from the regulators for Woori’s derivatives losses. To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

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Yen Falls Against Euro as Signs Global Slump Is Abating Spurs Yield Demand

August 18, 2009

By Yoshiaki Nohara and Ron Harui Aug. 19 (Bloomberg) — The yen fell for a second day against the euro after economic reports in Europe added to evidence the global recession is easing, prompting investors to shift to higher-yielding assets. Asian stocks may climb after German investor confidence advanced to the highest level in more than three years. The pound increased yesterday from near a one-month low versus the dollar after a U.K. Office for National Statistics report showed the inflation rate unexpectedly held at 1.8 percent in July, exceeding the median forecast of 1.5 percent. “It’s certainly adding to signs that consumer sentiment is improving,” said Alex Sinton , a senior dealer at ANZ National Bank Ltd. in Auckland. “If a little bit of risk is brought back to the table in Asian time today, you will see the euro break $1.4142 and extend toward the 200-day moving average at $1.4192.” The yen declined to 134.21 per euro as of 8:43 a.m. in Tokyo from 133.84 in New York yesterday. Japan’s currency weakened to 94.89 per dollar from 94.69. The dollar traded at $1.4145 per euro from $1.4136 Sterling was at $1.6569 from $1.6561 yesterday, when it rose 1.3 percent. The pound dropped to $1.6276 on Aug. 17, the lowest level since July 17. Yesterday’s advance helped sterling reduce its decline since Aug. 5 to 2.7 percent. The Standard & Poor’s 500 Index rose 1 percent in New York yesterday, crude oil for September delivery increased 4 percent to $69.45 a barrel, and gold futures for December delivery gained 0.4 percent to $939.40 per ounce. The benchmark MSCI Asia Pacific Index of regional shares ended little changed yesterday after falling as much as 1 percent. Germany’s ZEW The euro strengthened yesterday for the first time in three days versus the dollar and yen as the Mannheim-based ZEW Center for European Economic Research said its index of investor and analyst expectations for Germany increased this month to 56.1 from 39.5 in July. The median forecast of 35 economists in a Bloomberg News survey was for the index to rise to 45. The Dollar Index , which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro and yen, fell 0.4 percent to 78.98. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net ; Ron Harui in Singapore at rharui@bloomberg.net

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