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Video: Pond Says Fed May Be Testing Markets With Rate Move: Video

February 19, 2010

Feb. 19 (Bloomberg) — Michael Pond, an interest-rate strategist at Barclays Plc, talks with Bloomberg’s Betty Liu about the Federal Reserve’s decision to raise its discount rate for the first time in three years. Policy makers increased the discount rate to 0.75 percent from 0.50 percent, saying the move was “intended as a further normalization of the Federal Reserve’s lending facilities.” (Source: Bloomberg)

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U.S. Consumer Prices Rose 0.2% in January, Less Than Economists Forecast

February 19, 2010

By Timothy R. Homan Feb. 19 (Bloomberg) — The cost of living in the U.S. rose in January less than anticipated and a measure of prices excluding food and fuel fell for the first time since 1982, indicating the recovery is showing few signs of inflation. The consumer-price index increased 0.2 percent for a fifth straight month, led by higher fuel costs, Labor Department figures showed today in Washington. Excluding energy and food, the so-called core index unexpectedly fell 0.1 percent, reflecting a drop in new-car prices, clothing and shelter. Companies may have little success raising prices with unemployment projected to end the year at 9.5 percent. Subdued inflation will allow Federal Reserve policy makers to keep interest rates close to zero to help support the recovery. “Even though the economy appears to be entering a sustained recovery, it will take several quarters for inflation to accelerate in response,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “We expect core inflation to begin to firm in 2011.” Economists forecast the consumer-price index would rise 0.3 percent in January from a month earlier, according to the median of 78 projections in a Bloomberg News survey. Estimates ranged from no change to a gain of 0.6 percent. The core index was forecast to rise 0.1 percent, according to the Bloomberg survey. The decline in the core was the first since December 1982. Energy costs jumped 2.8 percent in January, led by higher prices for fuel oil and gasoline. The cost of crude oil on the New York Mercantile Exchange averaged $78.40 last month, up from $74.60 in December. Gasoline Prices Gasoline prices increased 4.4 percent, the most since August. The cost at the pump rose 10 cents to $2.71 a gallon on average in January, from $2.61 the previous month, according to AAA. The price has since retreated. Compared with January 2009, the CPI rose 2.6 percent after climbing 2.7 percent the previous month. The year-over-year gains in the consumer price index have been getting bigger as crude oil prices increase from an almost five-year low in December 2008. Food costs, which account for about 15 percent of the CPI, increased 0.2 percent in January, reflecting higher prices for dairy products, meat and fruits and vegetables. Rents of primary residences was unchanged. Owners- equivalent rent, one of the categories used to track rental prices, fell 0.1 percent last month after no change. Cars and Clothes New-car prices fell 0.5 percent in January, the most since August, and apparel costs dropped 0.1 percent. Medical-care costs rose 0.5 percent in January, the most in two years. The Fed’s long-term forecast for its preferred measure of inflation, the Commerce Department’s index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.5 percent to 2 percent. That gauge, which is typically lower than the CPI, was up 1.5 percent in the 12 months ended in December. Fed Chairman Ben S. Bernanke said last week that the central bank expects economic conditions, including “subdued inflation trends,” that may warrant an “exceptionally low” benchmark interest rate “for an extended period.” Central bank policy makers last month “agreed that underlying inflation currently was subdued and was likely to remain so for some time,” according to minutes of the Jan. 26- 27 meeting released this week. Consumers in the Reuters/University of Michigan preliminary survey, released Feb. 12, said they expect an inflation rate of 2.8 percent over the next five years. Those figures are tracked by Fed policy makers. Broadest Measure The CPI is the broadest of the three monthly price gauges from the Labor Department because it includes goods and services. Reports this week showed 1.4 percent gains in both the cost of imported goods and wholesale prices in January. Both increases were more than anticipated. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets. Airline fares fell 2.5 percent in January, the most since February 2009. Even with higher production and material costs, U.S. companies are reluctant to pass on the expenses to consumers. Wal-Mart, the world’s largest retailer, reported fourth-quarter sales yesterday that trailed its projection after cutting grocery and electronic prices. The Bentonville, Arkansas-based company reduced the cost of laptop computers, along with turkeys and cranberry sauce for holiday meals, to attract shoppers living paycheck to paycheck. “We see the influence of the paycheck cycle as pronounced now as it’s been in the past,” Chief Financial Officer Tom Schoewe said on a call with reporters. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Video: McCullough Sees Compression in Treasury Yield Curve: Video

February 19, 2010

Feb. 19 (Bloomberg) — Keith McCullough, chief executive officer of Hedgeye Risk Management and a Bloomberg Television contributing editor, talks with Bloomberg’s Erik Schatzker and Deirdre Bolton about the Federal Reserve’s decision to raise the discount rate by a quarter-point to 0.75 percent. The change, effective today, marks the first increase in the rate charged to banks for direct loans since June 2006. The Fed repeated in a statement in Washington yesterday that its benchmark federal funds rate would stay low for an “extended period.” (Source: Bloomberg)

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Fed Discount-Rate Increase Signals Retreat From Emergency Monetary Easing

February 18, 2010

By Craig Torres and Vivien Lou Chen Feb. 19 (Bloomberg) — The Federal Reserve Board sent its most explicit signal yet that the emergency supply of liquidity to financial markets is done and the most aggressive monetary policy easing in its 96-year history will eventually reverse. Chairman Ben S. Bernanke and his colleagues at the Board of Governors raised the rate charged to banks for direct loans by a quarter-point to 0.75 percent, effective today. It was the first increase in the discount rate since June 2006. The Fed portrayed the decision as a “normalization” of lending that would have no impact on monetary policy, repeating in a statement in Washington yesterday that its benchmark federal funds rate would stay low for an “extended period.” The assurances didn’t stop investors from increasing bets that the Fed would tighten policy in the fourth quarter. The dollar rose and U.S. stock futures fell after the announcement. “The discount rate historically has always been used as a psychological tool for signaling the future course of monetary policy,” said Sung Won Sohn , former chief economist at Wells Fargo & Co. and now an economics professor at California State University-Channel Islands in Camarillo, California. “The bottom line is the Fed is signaling that in the future rates are more likely to go up, rather than stay stable or go down.” U.S. central bankers closed four emergency lending facilities this month and are preparing to reverse or neutralize the more than $1 trillion in excess bank reserves they have pumped into the banking system. The discount-rate increase will encourage banks to borrow in private markets rather than from the Fed, the statement said. ‘Time of Uncertainty’ “There is no way of doing this in times of uncertainty and not cause some reaction in financial markets,” said David Montero-Rosen , chief investment officer at the Graham & Dodd Fund LLC in New York. The dollar rose to $1.3485 per euro as of 1:06 p.m. in Tokyo from $1.3527 late yesterday in New York, after climbing to $1.3444, the strongest since May 18. Futures on the Standard & Poor’s 500 Index expiring in March lost 1.1 percent to 1,093.50. Bernanke prepared investors for the move in Feb. 10 testimony to Congress, saying the discount rate would have to be raised “before long.” In the minutes of the January 26-27 Federal Open Market Committee meeting released Feb. 17, policy makers said an increase “would soon be appropriate.” Even so, the increase came sooner than many analysts and investors expected. ‘Big Surprise’ “The big surprise was the timing,” said Alan Ruskin , head of currency strategy at RBS Securities Inc. in Stamford, Connecticut. “This is just one more very, very clear signal that the abnormal liquidity provisions provided during the crisis are being withdrawn.” Fed Bank of St. Louis President James Bullard yesterday said expectations for an interest-rate increase were exaggerated. “The idea that’s in markets that there’s a high probability that we’ll raise rates later this year is overblown,” Bullard said in response to audience questions after a speech in Memphis, Tennessee. “There’s also some probability, maybe more, that this will extend into 2011.” Larry Meyer , a former Fed governor and vice chairman of Macroeconomic Advisers LLC in Washington, said yesterday’s decision “says absolutely nothing” about the timing of the first increase in the federal funds rate. “We believe that the Fed will not raise the funds rate for the first time until the middle of 2011,” Meyer said in a Bloomberg Television interview. Rate Near Zero The Fed has kept the benchmark rate for overnight borrowing between banks to a range of zero to 0.25 percent since December 2008 and repeated after last month’s policy meeting that the rate would stay low for an “extended period.” Fed officials have nevertheless been warning financial institutions to be prepared for higher rates and are keeping a close watch on leverage, market valuations and overall financial conditions. In January, the Fed Board issued an advisory with other regulators urging banks to strengthen their management of interest-rate risk. Yesterday’s announcement was “basically a psychological message to the marketplace that at some point the Fed does have to begin to pay attention to the potential of inflation down the road,” Kelly King , chairman and chief executive of BB&T Corp., said in an interview with Bloomberg Television. “I don’t think they are going to be moving short-term rates anytime in the very near future.” Regional Fed Banks King is a member of the Richmond Fed’s board of directors, which, like the 11 other regional Fed boards, has the authority to request changes in the discount rate. Those requests are subject to final review and determination by the Board of Governors. The Board said yesterday it approved requests for the rate increase from all 12 regional Fed banks. Lenders have borrowed less from the Fed’s district banks as the crisis ebbed and the economy returned to growth. Financial institutions have reduced their reliance on the Fed window. Banks had borrowed $14.1 billion as of Feb. 17, representing less than 1 percent of the central bank’s $2.28 trillion in total assets. A year ago, borrowing stood at $65.1 billion. The Fed continues to add reserves to the banking system with its purchases of $1.43 trillion in housing debt, which are scheduled to end next month. Bernanke used the discount rate as his first policy tool to attack the financial crisis. Before August 2007, the discount rate was set at one percentage point above the federal funds rate. As subprime mortgage defaults began to ripple through the financial system in August 2007, the Fed reduced the spread to half a percentage point and lengthened the term to 30 days from overnight. Bear Stearns Following the rescue of Bear Stearns Cos. in March 2008, the Fed again lowered the spread to a quarter point and extended the term to 90 days. The term was later reduced to 28 days. Yesterday, the Fed board said that effective March 18, the maturity on discount- window loans will be shortened to overnight. The changes are “not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy,” yesterday’s statement said. Fed officials reinforced the message in speeches that were previously scheduled for last night. Atlanta Fed President Dennis Lockhart told a Georgia business audience that policy “remains accommodative.” Fed Governor Elizabeth Duke , speaking in Norfolk, Virginia, said the steps “do not signal any change in the outlook for monetary policy.” To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net ; Vivien Lou Chen in Memphis at vchen1@bloomberg.net

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Asian Stocks, U.S. Futures Drop as Dollar Gains on Discount Rate Increase

February 18, 2010

By Michael P. Regan Feb. 19 (Bloomberg) — Asian stocks and U.S. equity futures fell, while the dollar rose as an increase in the Federal Reserve’s discount rate spurred concern the economic rebound will slow as stimulus programs are unwound. The MSCI Asia Pacific Index, a gauge of the region’s equities, lost 0.5 percent to 117.17 as of 9:43 a.m. in Tokyo. Futures on the Standard & Poor’s 500 Index expiring in March lost 0.8 percent to 1,096.6. The Dollar Index , which tracks the currency against six major U.S. trading partners, rallied 0.7 percent to 80.934. Oil and copper retreated in extended trading. Stocks and commodities gained in the regular session as U.S. economic and earnings reports bolstered confidence that the recovery from the first global recession since World War II would be sustained. Futures trading after the close of exchanges signaled the S&P 500 may erase today’s 0.7 percent advance when markets open tomorrow. “Anytime interest rates go up, people think borrowing costs are going to rise for business and that’s bad,” said Jerome Dodson , who oversees $3.5 billion as president of Parnassus Investments in San Francisco. “That’s why traders and speculators are selling the market down. I don’t think it’ll last long because it does send the message that the Fed isn’t worried about the economy falling back into a recession.” The S&P 500 Financial Select Sector SPDR Fund , an exchange- traded fund that tracks financial stocks and is known by its XLF ticker symbol, fell 0.9 percent to $14.25 in after-hours trade, erasing its gain from the regular session. Shares of Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp. each retreated more than 1 percent. Options Gain A gauge of options prices advanced in extended trading, paring a 12 percent slide over the past three days. The iPath S&P 500 VIX Short-Term Futures exchange-traded note, which tracks futures on the VIX, rose 2.1 percent to $28.42. The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 5 percent to close at 20.63 before the Fed’s statement. The gauge tracks prices for options on the S&P 500. Two-year Treasury notes rose 2.5 basis points to 0.952 percent. The difference in yield between U.S. 2- and 10-year notes, known as the yield curve, had steepened earlier to a record as reports showed that Philadelphia region manufacturing and U.S. leading indicators rose. The Treasury said it will sell $126 billion in notes and bonds next week. Crude oil , which climbed 2.2 percent to a five-week high of $79.06 a barrel in the regular session, sank 0.9 percent to $78.34 in extended electronic trading. Copper futures dropped 0.7 percent to $3.282 a pound. Quarter-Point Increase The Fed raised the discount rate from 0.5 percent to 0.75 percent effective Feb. 19 and said the move will encourage financial institutions to rely more on money markets, rather than the central bank, for short-term loans. It was the first increase in the discount rate in more than three years, and the move widens the discount rate spread over the top range for the federal funds rate to 0.5 percentage point. The central bank also cited last month’s statement, which said economic conditions are likely to warrant “exceptionally low” levels of the federal funds rate, or the target rate for overnight loans between banks, for “an extended period.” The move marks another step by the Fed in a gradual retreat from its unprecedented actions to halt the deepest financial crisis since the Great Depression. The Fed has provided hundreds of billions of dollars in credit to banks, bond dealers, commercial paper borrowers and troubled financial institutions. ‘Further Normalization’ “These changes are intended as a further normalization of the Federal Reserve’s lending facilities,” the central bank said today in a statement. “The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy.” Fed Chairman Ben S. Bernanke said Feb. 10 that he may increase the discount rate “before long,” previewing the first interest-rate move in more than a year. Stocks have risen in the period before government borrowing costs began their biggest increases, history shows. The S&P 500 gained an average 8.4 percent in the six months before the last five increases in the Fed’s target rate for overnight loans between banks and gained another 82 percent in the bull markets that followed, Bloomberg data show. ‘Send a Signal’ “It does send a signal that perhaps the Fed believes the economy is strengthening,” said Peter Jankovskis , who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “There’s always possibility of miscalculation. But the financial system itself seems to be quite solid right now. The economy is sluggish but not because of the financial system.” The start of the Fed’s last cycle of interest rate increases spurred losses for stocks before a rebound. The S&P 500 declined 5.8 percent over eight months starting in January 2004, when policy makers dropped their commitment to hold interest rates low “for a considerable period.” Former Fed Chairman Alan Greenspan , in response to the bursting of the Internet and technology bubble and the Sept. 11 terrorist attacks, had lowered Fed funds in 2001 from 6.5 percent to 1.75 percent, then reduced the rate in June 2003 to 1 percent, a 45-year low. The S&P 500 gained 49 percent from its bear market low of 776.76 on Oct. 9, 2002 through Feb. 11, 2004. After the drop following the Fed statement, it rallied another 47 percent before reaching an all-time high of 1,565.15 on Oct. 9, 2007. To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net

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Asian Stocks, U.S. Futures Drop as Dollar Gains on Discount Rate Increase

February 18, 2010

By Michael P. Regan Feb. 19 (Bloomberg) — Asian stocks and U.S. equity futures fell, while the dollar rose as an increase in the Federal Reserve’s discount rate spurred concern the economic rebound will slow as stimulus programs are unwound. The MSCI Asia Pacific Index, a gauge of the region’s equities, lost 0.5 percent to 117.17 as of 9:43 a.m. in Tokyo. Futures on the Standard & Poor’s 500 Index expiring in March lost 0.8 percent to 1,096.6. The Dollar Index , which tracks the currency against six major U.S. trading partners, rallied 0.7 percent to 80.934. Oil and copper retreated in extended trading. Stocks and commodities gained in the regular session as U.S. economic and earnings reports bolstered confidence that the recovery from the first global recession since World War II would be sustained. Futures trading after the close of exchanges signaled the S&P 500 may erase today’s 0.7 percent advance when markets open tomorrow. “Anytime interest rates go up, people think borrowing costs are going to rise for business and that’s bad,” said Jerome Dodson , who oversees $3.5 billion as president of Parnassus Investments in San Francisco. “That’s why traders and speculators are selling the market down. I don’t think it’ll last long because it does send the message that the Fed isn’t worried about the economy falling back into a recession.” The S&P 500 Financial Select Sector SPDR Fund , an exchange- traded fund that tracks financial stocks and is known by its XLF ticker symbol, fell 0.9 percent to $14.25 in after-hours trade, erasing its gain from the regular session. Shares of Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp. each retreated more than 1 percent. Options Gain A gauge of options prices advanced in extended trading, paring a 12 percent slide over the past three days. The iPath S&P 500 VIX Short-Term Futures exchange-traded note, which tracks futures on the VIX, rose 2.1 percent to $28.42. The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 5 percent to close at 20.63 before the Fed’s statement. The gauge tracks prices for options on the S&P 500. Two-year Treasury notes rose 2.5 basis points to 0.952 percent. The difference in yield between U.S. 2- and 10-year notes, known as the yield curve, had steepened earlier to a record as reports showed that Philadelphia region manufacturing and U.S. leading indicators rose. The Treasury said it will sell $126 billion in notes and bonds next week. Crude oil , which climbed 2.2 percent to a five-week high of $79.06 a barrel in the regular session, sank 0.9 percent to $78.34 in extended electronic trading. Copper futures dropped 0.7 percent to $3.282 a pound. Quarter-Point Increase The Fed raised the discount rate from 0.5 percent to 0.75 percent effective Feb. 19 and said the move will encourage financial institutions to rely more on money markets, rather than the central bank, for short-term loans. It was the first increase in the discount rate in more than three years, and the move widens the discount rate spread over the top range for the federal funds rate to 0.5 percentage point. The central bank also cited last month’s statement, which said economic conditions are likely to warrant “exceptionally low” levels of the federal funds rate, or the target rate for overnight loans between banks, for “an extended period.” The move marks another step by the Fed in a gradual retreat from its unprecedented actions to halt the deepest financial crisis since the Great Depression. The Fed has provided hundreds of billions of dollars in credit to banks, bond dealers, commercial paper borrowers and troubled financial institutions. ‘Further Normalization’ “These changes are intended as a further normalization of the Federal Reserve’s lending facilities,” the central bank said today in a statement. “The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy.” Fed Chairman Ben S. Bernanke said Feb. 10 that he may increase the discount rate “before long,” previewing the first interest-rate move in more than a year. Stocks have risen in the period before government borrowing costs began their biggest increases, history shows. The S&P 500 gained an average 8.4 percent in the six months before the last five increases in the Fed’s target rate for overnight loans between banks and gained another 82 percent in the bull markets that followed, Bloomberg data show. ‘Send a Signal’ “It does send a signal that perhaps the Fed believes the economy is strengthening,” said Peter Jankovskis , who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “There’s always possibility of miscalculation. But the financial system itself seems to be quite solid right now. The economy is sluggish but not because of the financial system.” The start of the Fed’s last cycle of interest rate increases spurred losses for stocks before a rebound. The S&P 500 declined 5.8 percent over eight months starting in January 2004, when policy makers dropped their commitment to hold interest rates low “for a considerable period.” Former Fed Chairman Alan Greenspan , in response to the bursting of the Internet and technology bubble and the Sept. 11 terrorist attacks, had lowered Fed funds in 2001 from 6.5 percent to 1.75 percent, then reduced the rate in June 2003 to 1 percent, a 45-year low. The S&P 500 gained 49 percent from its bear market low of 776.76 on Oct. 9, 2002 through Feb. 11, 2004. After the drop following the Fed statement, it rallied another 47 percent before reaching an all-time high of 1,565.15 on Oct. 9, 2007. To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net

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Daimler Posts Unexpected Fourth-Quarter Loss, Plans to Withdraw Dividend

February 18, 2010

By Chris Reiter Feb. 18 (Bloomberg) — Daimler AG , the second-largest maker of luxury vehicles, posted an unexpected fourth-quarter loss and said it plans to cancel the annual dividend, sending the shares down the most in almost 11 months. The manufacturer had a 352 million-euro ($478 million) quarterly loss, it said today in a statement . That missed analysts’ estimates for a 254.6 million-euro profit. Sales fell 11 percent compared with a year earlier to 21.3 billion euros, yet surpassed estimates for revenue of 20.8 billion euros as deliveries rebounded after the global recession. Daimler’s revamped E-Class Mercedes-Benz sedan isn’t doing as well as the company hoped and faces tough competition from Bayerische Motoren Werke AG’s new 5-Series, which “seems to be getting better reviews,” said Stephen Pope , chief global equity strategist at Cantor Fitzgerald in London. The firm lowered its recommendation on Daimler shares to “sell’ from “buy” today. Daimler plunged as much as 3.12 euros, or 9.4 percent, to 29.93 euros, the biggest intraday drop since March 30, and was down 7.3 percent as of 11:06 a.m. in Frankfurt trading. The stock has declined almost 18 percent this year, valuing the Stuttgart, Germany-based manufacturer at 32.5 billion euros. Daimler didn’t immediately have an explanation for the fourth-quarter loss, according to three company representatives. Truck Charges The company’s financial services unit took a charge of 100 million euros in 2009 related to exiting non-auto leasing businesses. The trucks unit had a charge of 340 million euros for restructuring, while the company had expenses of 388 million euros due to lower interest rates and 164 million euros for pensions. At least 75 million euros for the trucks reorganization was charged in the fourth quarter, as was most of the financial services expense. The automaker plans to pay no annual dividend for the first time since at least 1999. The fourth-quarter loss was an improvement from a year earlier, when Daimler had a loss of 1.5 billion euros. “As unsatisfactory as our figures for the year as a whole are, we definitely picked up momentum in the course of 2009,” Chief Executive Officer Dieter Zetsche said today at the company’s annual earnings press conference in Stuttgart. “We’re emerging from the crisis generating a lot of torque.” Daimler, which is also the world’s largest truckmaker, said it expects to increase vehicle sales in 2010 and will have earnings before interest and taxes of more than 2.3 billion euros this year. Target Not ‘Impressive’ The earnings target “isn’t that impressive,” Pope said. “They should be able to do more than that.” Daimler probably will pay a dividend again in 2010 and subsequent years, Chief Financial Officer Bodo Uebber said today in a speech. Daimler slashed spending by 5.3 billion euros last year by building fewer vehicles and cutting pay in response to the recession. The reduction exceeded an original target of 4 billion euros. The automaker racked up 3.8 billion euros in losses during a nine-month span before reporting a profit in the third quarter. Daimler began deliveries of the new E-Class last March and introduced a convertible variant in early 2010. The car, which overtook rival models from BMW and Volkswagen AG’s Audi brand, will face tougher competition when BMW, the largest luxury-car maker, rolls out an overhauled version of the 5-Series next month. ‘Attack’ Plan Mercedes-Benz has an “attack” strategy aimed at outpacing industry sales growth of 3 percent to 4 percent this year and closing the gap with BMW while fending off Audi, Thomas Weber , Daimler’s head of development, said in January. Daimler is investing more than 1.4 billion euros to expand its lineup of small cars. The carmaker is in talks with Renault SA , France’s second-biggest automaker, on a potential partnership to expand Daimler’s Smart brand and produce components such as engines for a planned series of four compact models. Daimler intends to conclude discussions in the first half of this year. The full-year net loss was 2.64 billion euros, compared with profit of 1.41 billion euros a year earlier, Daimler said today in a statement . Analysts had forecast a loss of 1.86 billion euros, according to the average of seven predictions in a Bloomberg survey. Daimler extended CEO Zetsche’s contract yesterday until the end of 2013. Weber won a similar extension and Wolfgang Bernhard was confirmed as head of production and purchasing at Mercedes- Benz. To contact the reporter on this story: Chris Reiter in Stuttgart, Germany, via creiter2@bloomberg.net .

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Vonn Wins Olympic Downhill Gold; White Hits Halfpipe

February 17, 2010

By Michael Buteau and Erik Matuszewski Feb. 17 (Bloomberg) — Lindsey Vonn overcame weather delays and a bruised shin to win the women’s downhill and help lift the U.S. back atop the medals standings at the Winter Olympics. Vonn, the World Cup downhill ski champion the past two seasons and winner of all but one of six races in the event this campaign, became the first American woman to win Olympic skiing’s ultimate speed race, finishing in 1 minute, 44.19 seconds at the course in Whistler, British Columbia. It was the first of five Olympic events for Vonn, who benefited from the combination of rain, fog and heavy snow over the past six days that delayed Alpine skiing events and gave her more time to recover from the bruise sustained during slalom training in Austria two weeks ago. “I dreamed about what this would feel like but it is much better in real life,” Vonn, 25, told reporters. “I got what I came here for — a gold medal. I have what I want and I’ll just keep fighting every day.” Vonn finished more than a second faster than every competitor except teammate Julia Mancuso , who took the silver in 1:44.75. The U.S. now has 10 medals, one more than Germany in the standings, and tied Switzerland and South Korea with three gold medals, the most at the Winter Games. Overcoming Injury Vonn was the 16th of 45 racers in the downhill, staged on a sunny day at the course two hours north of Vancouver. She said she was able to overcome discomfort from the bruise, which is located where her ski boot comes in contact with her shin. “My leg was killing me, I was tired and I didn’t know what to expect at the bottom,” said Vonn. “That last gate before the last jump was where I lost the World Cup. I’m so happy I made it down.” She beat Mancuso by more than a half-second and was two seconds ahead of Britt Janyk, a Canadian who grew up in Whistler, and Nadia Styger , a Swiss skier who beat Vonn at the same course two years ago. When Germany’s Maria Riesch skied to the finish more than two seconds behind after starting 22nd, Vonn was virtually assured of the gold medal. It’s the first time since the 1984 Sarajevo Winter Games that the U.S. won gold and silver in an Alpine event. Elisabeth Goergl of Austria took the bronze in 1:45.65. Two gold medals were awarded in cross-country skiing sprint events, with Marit Bjoergen of Norway winning the women’s competition and Nikita Kriukov of Russia taking the men’s title. It was the first gold medal of the Vancouver Winter Games for each country. Snowboarding Halfpipe Shaun White will have a chance to extend the U.S. medal lead when the men’s snowboard competitors slide down the halfpipe at Cypress Mountain outside Vancouver tonight. Rain and fog delayed several snowboard events since the Winter Games began Feb. 12. White, the 2006 halfpipe gold medalist in Turin, has won both World Cup events he has entered since then. He captured his third consecutive X Games title — and fifth overall — in Aspen, Colorado, this month after crashing in a practice run. “I’d be lying to say that crash didn’t shake me up,” White told reporters before the Vancouver opening ceremony. “It was an amazing thing for that to happen to me, to shake that off and win the event.” His biggest challenge may come from Iouri Podladtchikov of Switzerland. Podladtchikov, who competed for Russia in 2006 and has since gained Swiss citizenship, finished second to White at this year’s World Cup and X Games. Today’s snowboard competitors will perform in front of a smaller crowd than expected after weather problems forced organizers to refund 28,000 standing-room tickets for six events, according to Caley Denton , head of ticketing for the Vancouver Olympic Committee. Fans in the standing-room area account for about 40 percent of the spectators at Cypress. To contact the reporters on this story: Michael Buteau in Vancouver at mbuteau@bloomberg.net , and Erik Matuszewski in Vancouver, at matuszewski@bloomberg.net and.

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Google Payroll Shrinks For First Time In 2009

February 17, 2010

If you thought that Google (GOOG) was immune to the sluggish economy in 2009, think again. Buried deep in the 10-K that the company filed late Friday was an interesting disclosure: Google’s headcount actually shrunk in 2009 for the first time since the company has been public (and most likely for the first time ever, given Google’s growth spurt).

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Gazprom May Shift Shtokman Gas to U.K., France Until U.S. Demand Recovers

February 17, 2010

By [bn:PRSN=1] Anna Shiryaevskaya [] Feb. 17 (Bloomberg) — OAO Gazprom , the world’s largest gas producer, and its partners in the Arctic Shtokman project plan to direct some liquefied natural gas to Europe until demand for fuel imports recovers in North America. “The LNG business will develop in Europe,” Yuri Komarov , chief executive officer of Shtokman Development AG, said in an interview in the northern Russian port of Arkhangelsk yesterday. “Some LNG volumes can go to the European market, first of all, the U.K., Italy and France.” Gazprom, the majority owner in Shtokman, planned to market as much as 90 percent of its LNG to North America in a bid to break into the market. The company aims to gain 25 percent of the global LNG market by 2020 and with it greater flexibility than pipelines offer as the chilled gas can be shipped by tanker and sold on the spot market. Gazprom, Total SA and Statoil ASA delayed their first gas output at Shtokman by three years to 2016, with LNG production to start in the following year. Global fuel demand waned in the economic slowdown, while new LNG capacity and U.S. success in developing unconventional resources, such as shale gas, may lead to oversupply. “We expect the situation will change by the end of next year and either let us make an investment decision or not,” Komarov said. The partners plan to make a final investment decision on pipeline gas by March 2011 and on LNG by the end of that year. The LNG project will be ready to start when the market is ready for it, he said. Shtokman in 2015 The start of Shtokman may be moved up, with pipeline shipments as early as the end of 2015 if European demand recovers, Komarov said. The partners initially planned to ship half of Shtokman’s gas by pipeline and liquefy the other half. In the first phase, 23.7 billion cubic meters of gas a year will be pumped from the field. That ratio may be changed, Komarov said. Still, Gazprom remains committed to LNG production, he said. “From the strategic point of view, it is extremely important for Russia to have LNG,” Komarov said. “Gazprom, as a global player, will be able to choose gas flows depending on the market situation.” Shtokman, 550 kilometers (340 miles) offshore under the Barents Sea, will be connected to land through a subsea pipeline. The link will be extended by land to the town of Vyborg on the Gulf of Finland, where it will connect to the planned Nord Stream export pipeline under the Baltic Sea to Germany. Investment Burden The pipeline project documents will be ready to submit to the venture partners by September, Komarov said. The onshore link will be “purely Russian,” he said, with the design, construction and supplies provided by domestic companies. The partners are carrying out additional studies to minimize the capital expenditure, Shtokman Development First Deputy CEO Herve Madeo said at a conference in Arkhangelsk yesterday. Komarov declined to provide a new estimate for Shtokman’s project costs, which in 2006 were seen to be about $15 billion, saying the economics are “interesting.” “Maybe it will be one of the best projects in terms of investment burden,” Komarov said. “The investments per unit of production will be very low.” Shtokman has 3.9 trillion cubic meters of gas reserves, enough to supply the world for more than a year. It is surrounded by satellite fields that may hold 10 trillion cubic meters of gas, which may fuel the project into the future, Komarov said. To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

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Dell’s MSD Opens to Outside Money for European Distressed Fund

February 16, 2010

Dell and his family, is raising outside money for the first time through a fund that invests in distressed and undervalued European securities. MSD European Opportunity Fund LP is seeking to raise as much as $500 million, according to two people with

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Steven Chu Unaware That Nuclear Loans Have 50 Percent Risk of Default

February 16, 2010

The Obama administration on Tuesday announced a loan guarantee for the first new nuclear reactor to be built in the US in decades–part of a planned $54.5 billion program to kickstart a nuclear revival using government-backed loans. Yet Chu said he was not aware of a Congressional Budget Office study showing that the chances of default on these loans are “very high–well above 50 percent.”

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Samuel H. Williamson: The Senate Jobs Credit — Not Good Economics

February 16, 2010

From what I can tell, the Senate will vote on two tax credits, one that goes to employers for hiring workers that have been unemployed for two months, and another when they keep a new employee for 52 weeks. I think both these ideas may make some political sense, but they are not good economics. As I have posted in October, just hiring more people is not the answer to lowering unemployment. Every month five million workers more or less join the workforce. That is every month. At the same time an equal, or for the last several months a few thousand more, leave the ranks of workforce. To increase the number employed we need to reverse these two — that is have more people going into the workforce than out. A very important point is of — that five million, less than half were officially unemployed the previous month; more of them were coming from “not in the labor force”. Employers want to hire the best person for the job. When a group of perspective employees show up to interview, those that have been unemployed more that two months may not be the most productive. The most qualified person may have been out of the work force for a year, but they will not qualify, as they were not “officially” unemployed. The two-month rule will be a headache for employers and will reduce the chance that the best person gets the job. If a firm needs a new truck, we would not want to tell them they could only buy trucks that have been on the lot for at least two months. That is sort of what this bill is asking they do for new employees. Subsidizing the wage of new employees kept a year with a $1,000 income-tax credit does make a bit more sense in that new workers are learning the job at first and after a year are probably worth more to the employer. I cannot tell if the proposal is for the credit to go only to those hired who were unemployed for at least two month or any new hire. If it is the first, then I see it as a waste. If it is the later, then it might be justified as a subsidy for training costs. There is a better and simpler credit to increase employment. As I suggested a week ago, Congress should pass a bill that gives employers a credit on a percent of the increase in their FUTA wage base. That base is the first $7,000 paid each employee. The credit could be progressive so as to reward employers who add many workers. For example, $500 credit for the first 10% increase, $1,000 for the next 10%. A firm that has 10 workers earning more that $7,000 each would have a base of $70,000. If the next reporting period it had 11 employees, it would be worth a $500 credit. If they had 12 workers, they would receive a $1,500 credit. Before someone suggests I give up my job for someone unemployed, I want to say I am retired and do not have a salary. And I want to add that I have sympathy for those who have been unemployed for a long time, but I have a friend who is about to declare bankruptcy and is desperate to get a job. She has not been “unemployed” because she has been caring for her dying husband. It is hard to know how to pick the most deserving.

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Lennar Gambles on Distressed Real Estate Loans

February 15, 2010

out be Rialto Capital Advisors, a subsidiary of Lennar. This is not the first time Lennar has bought distressed loans. During the real estate bust in the early 1990’s, Lennar did the same and profited handsomely. This helped allay investor fears over

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Robert Weissman: A Disadvantaged Class? The Corporate Speech Index

February 12, 2010

One of the most astounding passages in the Supreme Court’s mind-boggling decision in Citizens United v. Federal Election Commission — the January decision holding that corporations have a First Amendment right to spend as much as they choose from their treasuries to support or oppose candidates for elected office — is this: [T]he Government may commit a constitutional wrong when by law it identifies certain preferred speakers. By taking the right to speak from some and giving it to others, the Government deprives the disadvantaged person or class of the right to use speech to strive to establish worth, standing, and respect for the speaker’s voice… The First Amendment protects speech and speaker, and the ideas that flow from each. This ode to the First Amendment is inspiring, until you recognize that the “disadvantaged class” reference is to corporations. When it comes to speech protections, there are surely many rational ways to distinguish corporations from real, live persons. One is that corporations are not real, live persons! Another is that for-profit corporations exist for the purpose of making money, and that this monomaniacal focus distinguishes them in very important ways from humans, who care not only about making money, but building community, expressing themselves, fairness, equality, justice, protecting future generations, stewarding the planet and much more. And other consequential difference, compounding these other points of difference, is that large and even not-so-large corporations have a lot more money, and can easily mobilize resources on a scale that vastly outdistances anything that real people can do. Thus the rather obvious conclusion that corporate money can distort elections and the political process. This is hardly speculative: large corporations dominated the political process even before Citizens United, a fact widely understood. Eighty-five percent of people in the United States believe big business has too much power in Washington. What may not be quite so obvious is how extraordinary are the resources that corporations can mobilize as against what is now spent on elections. Consider these juxtapositions — Total amount spent on federal elections in the 2008 election cycle: $5.285 billion Amount spent by Obama campaign in the 2008 election: $730 million Average amount raised by incumbent Members of the House of Representatives in the 2008 election: $1.356 million (challengers: $335,101) Average amount raised by incumbent Senators in the 2008 election: $8.741 million (challengers: $1,152,146) Exxon profits 2007 – 2008 : $85 billion Top-selling drug, Lipitor, revenues, 2007-2008: $27 billion Goldman Sachs bonus and compensation expense for 2009: $16.2 billion Value of Lockheed’s defense contracts in 2008: $15 billion The amount spent on cigarette advertising and promotion by the five largest cigarette companies in the United States in 2006: $12.49 billion Microsoft cash on hand: $33.4 billion And these comparisons, from the states — —- Amount spent on candidate races in California state elections, 2008: $225 million Revenues of the 97th largest corporation in California, Public Storage, 2008: $1.7 billion Amount spent on candidate races in Ohio state elections, 2008: $107 million Revenues of the 10th largest corporation in Ohio, Progressive Insurance, 2008: $12.8 billion Amount spent on candidate races in North Dakota state elections, 2008: $7.3 million Revenues of the largest corporation in North Dakota, 2008: $5 billion Amount spent on candidate races in Alabama state elections, 2008: $15.5 million Revenues of the second largest corporation in Alabama, Vulcan Materials, 2008: $3.6 billion Amount spent on candidate races in Nebraska state elections, 2008: $6.4 million Revenues of the 10th largest corporation in Nebraska, Public Storage, 2008: $1.9 billion Amount spent on candidate races in Rhode Island state elections, 2008: $7.2 million Revenues of the third largest corporation in Rhode Island, Hasbro, 2008: $4 billion —- These comparisons illustrate how easy it will be for one company, one industry, or the corporate class overall, to dominate the electoral discourse in the wake of Citizens United. We won’t know how this plays out, of course, until after it happens. Will Exxon alone decide to spend, say, $500 million to oppose or support candidates? Perhaps not — but the company might, and it certainly could. The mere fact an Exxon could spend that much, or more, will tilt the political process even more in favor of big business. And it is a virtual certainty that targeted corporate spending will escalate sharply in the wake of decision. Corporations do not establish their “worth” through political and expressive speech, as the Court suggests, but through a different kind of statement altogether — the financial statement. That fact, combined with their unparalleled treasuries, makes the Court’s decision in Citizens United a real and present danger to democracy. It must be overturned. Join the call for a constitutional amendment to undo Citizens United and restore the First Amendment and our democracy .

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Pepper Rock Resources Appoints Donald Sullivan to Advisory Board

February 12, 2010

CHICAGO, IL–(Marketwire – February 12, 2010) – Pepper Rock Resources Corp. ( OTCBB : PEPR ) (the “Company”), an emerging company focusing on low risk exploration and production reclamation projects in the oil and gas sector, is pleased to announce it has added the first member to its newly organized Board of Advisors.

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China Raises Reserve Requirement for Second Time in a Month to Cool Growth

February 12, 2010

By Bloomberg News Feb. 12 (Bloomberg) — China ordered banks to set aside more deposits as reserves for the second time in a month to cool the fastest-growing major economy after loan growth accelerated and property prices surged. The reserve requirement will increase 50 basis points effective Feb. 25, the People’s Bank of China said on its Web site today. The current level is 16 percent for big banks and 14 percent for smaller ones. China’s policy makers aim to avert asset bubbles and restrain inflation after flooding the economy with money last year to drive the nation’s recovery from the first global recession since World War II. The central bank said yesterday that it wants to gradually normalize monetary conditions from a “crisis mode” after gross domestic product expanded a more- than-forecast 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years. “Liquidity continues to flood the financial system this year,” said Lu Zhengwei , a Shanghai-based economist at Industrial Bank Co. “The central bank needs to stay ahead of the curve by tightening before inflation starts to gain pace.” The central bank on Jan. 12 increased banks’ reserve requirements for the first time since June 2008 after a record 9.59 trillion yuan ($1.4 trillion) of new loans in 2009. New loans in January soared to more than the previous three months combined, prompting the central bank to impose even higher reserve ratios on some individual banks. Surging Loans January’s 1.39 trillion yuan of loans amounted to 19 percent of the 7.5 trillion yuan target set by the banking regulator for this year. M2 broad money supply rose 26 percent, compared with the central bank’s forecast of a 17 percent gain for this year as a whole. Shanghai’s property market is in a bubble and the government is trying to “take some heat out of the economy,” investor Jim Rogers , author of “A Bull in China,” said Jan. 19. Property prices surged 9.5 percent in January from a year earlier, the fastest pace in 21 months, after Premier Wen Jiabao pledged in the previous month to clamp down on real-estate speculation and keep inflation at “reasonable” levels. Inflows of so-called hot money from abroad are complicating the central bank’s efforts to soak up liquidity and reduce the risk that the economy will overheat. Consumer prices rose for a third month in January after nine months of deflation. Trade Boon Improved global trade may also aid China’s growth this year, with the customs bureau reporting a second straight increase in exports in January. Economists at the government-backed Chinese Academy of Social Sciences warned Jan. 11 that gross domestic product could expand as much as 16 percent in 2010 unless policy makers withdrew stimulus. While the central bank has reiterated it will maintain a “moderately loose” monetary policy stance this year, Governor Zhou Xiaochuan told reporters Feb. 9 that price increases will be “closely” monitored. According to a Jan. 22 note from DBS Holdings Ltd., Southeast Asia’s largest bank, “China has already been in exit-strategy mode for seven months” as policy makers gradually impose tightening measures. Besides record lending, a 4 trillion yuan, two-year stimulus package and subsidies for consumer purchases have driven China’s recovery. The nation has also kept its currency pegged at about 6.83 per dollar since July 2008 to aid exporters. To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net

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Roche Says Experimental Diabetes Drug Meets Key Target in Patient Study

February 11, 2010

By Angela Cullen Feb. 11 (Bloomberg) — Roche Holding AG said results from five late-stage clinical trials show that its experimental diabetes drug taspoglutide reduced blood sugar levels when compared with or added to widely prescribed treatments. The drug met the main goals of studies comparing its effectiveness against Sanofi-Aventis SA’s Lantus, Eli Lilly & Co. and Amylin Inc.’s Byetta, and Merck & Co.’s Januvia as well as in tests looking at its use in combination with the generic treatment metformin and against placebo, Basel, Switzerland- based Roche said in an e-mailed statement today. Taspoglutide, licensed to Roche by French biotechnology company Ipsen SA in 2006, belongs to a newer class of diabetes medicines that imitate a hormone called GLP-1 and stimulate the pancreas to produce more insulin after meals. The once-weekly injection may compete with the twice-daily Byetta shot as Lilly and Amylin also work on a once-a-week version of their drug. “We already see a high probability that taspoglutide, while not the first in class, may emerge as the best in its class,” analysts at Zuercher Kantonalbank wrote in a research note to clients today. “We also welcome the fact that Roche is building an increasingly diversified product portfolio in growing disease areas and will no longer be so dependent on the cancer market.” Roche gained 2.60 Swiss francs, or 1.5 percent, to 177.6 francs at 9:48 a.m. in Zurich trading. Ipsen fell 16 cents, or 0.4 percent, to 36.56 euros in Paris. Diabetes Market Roche is seeking to expand beyond its best-selling cancer drugs and take a share of the growing diabetes market. Diabetes treatments were the fourth-best selling medications in 2008, with $27 billion in global sales, according to IMS Health Inc., a Norwalk, Connecticut-based company that tracks prescription trends. More than 20 million Americans have diabetes, which occurs when a patient doesn’t have enough of the hormone insulin used to convert blood sugar to energy. Fatty diets and sedentary lifestyles are contributing to an increase in the condition, which raises the risk of heart disease and metabolic disease. The number of people with diabetes in the U.S. is expected to almost double to 44 million in the next quarter century as obesity rates skyrocket, according to a study published in Diabetes Care in December. Novo Nordisk A/S won U.S. approval last month for Victoza, also a so-called GLP-1 analogue. The drugs are among the first facing tougher Food and Drug Administration standards for cardiovascular safety in new diabetes treatments. The standards were implemented in December 2008 after GlaxoSmithKline Plc’s Avandia was linked to heart attacks after eight years on the market. To contact the reporter on this story: Angela Cullen in Frankfurt at acullen8@bloomberg.net ;

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Japanese Machinery Orders Rise More-Than-Anticipated 20.1% From Record Low

February 9, 2010

By Keiko Ujikane and Tatsuo Ito Feb. 10 (Bloomberg) — Japanese machinery orders rose in December from a record low, supporting a recovery from the country’s deepest postwar recession. Orders, an indicator of business investment in three to six months, climbed 20.1 percent from November, the Cabinet Office said today in Tokyo. The median forecast of 31 economists surveyed by Bloomberg News was for an 8 percent gain. A resurgence in overseas demand thanks to global stimulus spending is bolstering earnings at exporters including Suzuki Motor Corp. and Canon Inc. The rebound in orders may not lead to sustainable gains in capital investment because factories are sitting idle in the wake of Japan’s slump, limiting the need for companies to buy plant and equipment. “The worst is over for corporate earnings and companies have more cash on hand, so capital spending may start increasing gradually from the second quarter,” Hiroshi Watanabe , an economist at the Daiwa Institute of Research in Tokyo, said before the report was released. “But it will be just an investment to replace depreciated assets, not to beef up capacity.” The yen traded at 89.81 per dollar at 8:59 a.m. in Tokyo from 89.80 before the report was published. The value of orders totaled 751.2 billion yen ($8.3 billion) in December, the report showed. Bookings in November dropped to 625.3 billion yen, the lowest since comparable data were first compiled in April 1987. The Cabinet Office forecast orders will rise 2 percent in the three months ending March 31. Faster Growth Growth probably accelerated last quarter, led by exports. Gross domestic product expanded at an annual 3.6 percent pace in the three months ended Dec. 31, according to the median estimate of 23 economists surveyed by Bloomberg News. The report is due Feb. 15. Demand from Asia is prompting Japanese exporters to increase production . Factory output rose for a 10th month in December and exports advanced for the first time since Lehman Brothers Holdings Inc. collapsed 15 months earlier, government reports showed last month. Suzuki Motor , Japan’s second-largest minicar maker, last week raised its net income forecast on growing sales in India, where its Maruti Suzuki India Ltd. unit is spending 17 billion rupees ($364 million) to almost double capacity at a factory near New Delhi. Canon’s Profit Canon last month forecast its biggest annual profit increase in a decade as the global recovery revives demand for cameras and office equipment. The company said camera and printer sales will probably rise for the first time in three years, helped by demand from China. “Overseas demand for Japanese machinery has made a good start on a V-shaped recovery thanks to the economic rebound in Asia,” said Naoki Iizuka , a senior economist at Mizuho Securities Co. in Tokyo. “But we have yet to see a solid recovery in core domestic orders due to a lagging recovery in demand in the non-manufacturing sector.” Increases in capital goods shipments and machine tool orders indicate corporate investment will rebound in coming months, according to Kyohei Morita , chief economist at Barclays Capital in Tokyo. Not all companies are optimistic the global rebound will be sustainable enough to fuel their profits, with manufacturers including Sony Corp. cutting costs to limit losses. Sony last week narrowed its forecast for a net loss, saying it is approaching its target of cutting 330 billion yen in costs by eliminating jobs and shutting factories. “Capacity utilization is rebounding but it’s still at a low level, meaning companies remain reluctant to invest in new facilities and equipment,” said Junko Nishioka , chief economist at RBS Securities Japan Ltd. in Tokyo. “We won’t see stable increases in capital investment until the latter half of this fiscal year.” To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net ; Tatsuo Ito in Tokyo at tito@bloomberg.net .

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BHP Billiton’s First-Half Net Income More Than Doubles, Beating Estimates

February 9, 2010

By Rebecca Keenan and Jesse Riseborough Feb. 10 (Bloomberg) — BHP Billiton Ltd. , the world’s largest mining company, said first-half profit more than doubled, beating analyst expectations as demand for commodities surged in China and India. Net income was $6.1 billion, or 109.8 cents a share, in the six months ended Dec. 31, from $2.6 billion, or 47 cents a share, a year earlier, Melbourne-based BHP said today in a statement. That compares with the $5.5 billion median estimate of eight analysts surveyed by Bloomberg News. Global economic conditions have improved over the past six months as the United States and Europe lifted industrial output and China returned to double digit growth, BHP said today. Xstrata Plc reinstated its dividend this week and said the outlook for commodities demand was “very promising.” “Mining companies are on a much firmer footing than what they were last year,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. including BHP shares. “Overall, an excellent result and cash-flow wise it was at the top end of expectations.” BHP shares rose 3.2 percent to A$41.11 at 10:01 a.m. Sydney time. They gained 24 percent for the half-year ended Dec. 31. The company approved a $1.93 billion iron ore expansion last month after reporting a strong recovery in the fourth quarter in commodity prices, driven by China. Citigroup Inc. commodity analyst Alan Heap said last week demand may turn positive in coming months. Global Conditions “Physical demand for bulk commodities continues to be very strong in most regions,” BHP said in the statement. “Commodity markets will continue to be largely dependent on Chinese and Indian demand. In the short term, it is critical to monitor the pace of monetary tightening and the rate of loan growth for commodity intensive sectors in China.” Chinese regulators, aiming to stem rising inflationary pressures, moved last month to slow a credit boom with measures to restrict lending. Their efforts to stem inflationary pressures came as the nation’s economic growth accelerated to a 10.7 percent year-on-year pace in the last three months of 2009. China is the world’s largest consumer of all industrial metals. BHP will pay a first-half dividend of 42 cents, up from 41 cents a year earlier. That’s lower than the projected dividend of 44 cents, according to Bloomberg data. BHP booked $2.7 billion in charges in the first half of 2009 after metal prices slid because of the global financial crisis. Cash Flow First-half sales decreased 18 percent to $24.6 billion, the company said in the statement. Profit, excluding one-time items, fell 7 percent to $5.7 billion. That compares with the $5.1 billion average of 20 analyst estimates supplied by BHP. Cash flow from operations fell 56 percent to $5.7 billion. The weaker dollar against BHP’s main operating currencies cut underlying earnings by $1.5 billion, the company said. The Australian dollar averaged 87 cents in the first half, compared with 78 cents a year earlier, it said. Underlying earnings before interest and tax at BHP’s iron unit dropped 50 percent to $2.09 billion after the global recession forced miners to slash prices by 33 percent in 2009, the first reduction in seven years. The unit was last year the company’s biggest earner and has now become the third-biggest behind base metals and petroleum. BHP’s output of ore increased 6 percent to a record 62.5 million metric tons. Contract prices may climb 31 percent to the second highest on record for the year starting April 1, according to the mean estimate of 17 analysts surveyed by Bloomberg last month. The demand revival will benefit BHP, Rio Tinto Group and Vale SA, the three largest suppliers of iron ore. Rio and BHP in December agreed to an Australian iron ore joint venture that they say will save them at least $10 billion. The plan, announced in June, will combine mines, rail, ports and workforces in the Pilbara region. The venture is expected to be completed in the second half, Rio said last month. The year-earlier charges included costs for closing the Ravensthorpe nickel mine in Western Australia and the Pinto Valley copper plant in the U.S. as well as for abandoning the proposed Rio Tinto takeover. To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net Jesse Riseborough in Melbourne at jriseborough@bloomberg.net .

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McDonald’s Worldwide January Sales Rise 2.6%, Topping Analysts’ Estimates

February 9, 2010

By Courtney Dentch Feb. 9 (Bloomberg) — McDonald’s Corp ., the world’s largest restaurant company, said global sales rose 2.6 percent in January, topping some analysts’ estimates, as demand in Asia and the U.K. countered a decline the in U.S. Sales at U.S. stores open at least 13 months fell 0.7 percent and climbed 4.3 percent in Europe, the Oak Brook, Illinois-based company said today in a statement. Sales in Asia, the Middle East and Africa also rose 4.3 percent. McDonald’s introduced a $1 breakfast menu in January and added a wrap version of its Big Mac sandwich to revive U.S. sales hurt by a slowdown in consumer spending and poor weather in the first half of the month. Longer opening hours in the U.K. and France drove sales in those markets, and demand for breakfast and staples such as french fries added to sales in Australia and Japan. “Underlying trends, excluding weather, improved from December, helped by the successful launches of newer initiatives,” David Tarantino , an analyst with Robert W. Baird & Co. wrote in a note today. He rates the stock “outperform.” McDonald’s rose 21 cents to $63.13 at 10:08 a.m. in New York Stock Exchange composite trading. The shares gained less than 1 percent last year. Global sales were predicted to rise 2 percent, the average of estimates from analysts at Barclays Capital, Jefferies & Co. and Robert W. Baird. U.S. sales were projected to be unchanged. The analysts projected gains of 4 percent in Europe and 1.3 percent in Asia, the Middle East and Africa. McDonald’s also said the closure of about 430 restaurants in Japan over the next 12 to 18 months will cost about $40 million to $50 million after taxes, primarily in the first half. To contact the reporter on this story: Courtney Dentch in New York at cdentch1@bloomberg.net .

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Euro, Oil, Copper Gain on Greece Aid Speculation; U.S. Index Futures Rise

February 9, 2010

By Justin Carrigan Feb. 9 (Bloomberg) — The euro rallied and emerging-market stocks recovered from the worst three-day slide in a year on speculation Greece will get European help to tackle its budget deficit. U.S. stock-index futures advanced. The euro strengthened 0.6 percent against the dollar at 10:23 a.m. in London, snapping four days of declines, and ended a three-day drop against the yen. The MSCI Emerging Markets Index added 0.9 percent after falling 6.1 percent in the past three sessions. Futures on the Standard & Poor’s 500 Index increased 0.8 percent. Greece’s ASE Index rose 3.4 percent, rebounding from four days of losses. European Union leaders will discuss Greece’s plans to reduce the region’s biggest deficit when they meet Feb. 11, and European Central Bank President Jean-Claude Trichet ’s decision to leave a meeting of policy makers in Sydney one day early fanned speculation that officials will agree on aid. European Commission President Jose Barroso said investors would be wrong to bet against the euro. “The markets are smelling a deal for Greece, and for that reason, we’re seeing some stabilization,” said Robin Marshall , director of fixed income in London at Smith & Williamson Investment Management, which oversees about $20 billion. “It’s hard to see there not being one, given the potential fallout and contagion effect.” Yen, Pound The 16-nation currency climbed as much as 0.7 percent against the dollar, its biggest gain since Jan. 11. The euro appreciated 1 percent versus the yen and 0.6 percent compared with the British pound. Greek banks led the gains in European stocks as National Bank of Greece SA, the nation’s biggest lender, surged 6.3 percent in Athens, while Alpha Bank AE jumped 7.1 percent. The 10-year Greek government bond rose, with the yield falling 10 basis points to 6.66 percent. Taiwan shares led the advance among major emerging markets, with the benchmark Taiex index climbing 2 percent. Developing- nation currencies strengthened, led by a 0.7 percent advance in South Korea’s won against the dollar and a 0.3 percent increase in Poland’s zloty versus the euro. The gain in U.S. futures indicated the S&P 500 may rebound from yesterday’s 0.9 percent drop. The Dow Jones Industrial Average closed yesterday below 10,000 for the first time since November on concern deteriorating European government finances will hurt economies elsewhere. European Stocks The MSCI World Index of 23 developed nations’ stocks added 0.1 percent, ending four days of losses. Europe’s Dow Jones Stoxx 600 Index climbed 0.3 percent. Swatch Group AG rallied 5.5 percent in Zurich as the maker of Omegas posted better-than- estimated earnings. Gains in Europe were limited as Unibail-Rodamco SE, Europe’s largest shopping-center owner, dropped 3.9 percent in Paris after saying the recession curbed growth in rental income. SAS AB plummeted 21 percent in Stockholm as the owner of the Nordic region’s largest airline reported a loss. The MSCI Asia Pacific Index added 0.3 percent, gaining for the first time in four days. Nissan Motor Co. predicted a return to profit this fiscal year, scrapping an earlier loss estimate. Treasuries fell for the first time in four days as the government prepared to sell record-tying amounts of three-, 10- and 30-year bonds this week, starting with $40 billion of 2013 notes today. The yield on the 10-year note rose 3 basis points to 3.60 percent. Copper advanced 1 percent to $6,510 a metric ton in London, leading gains in industrial metals. Gold for immediate delivery added 0.7 percent to $1,070.43 an ounce. Crude oil advanced 0.8 percent to $72.46 a barrel in New York trading. To contact the reporter for this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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Video: U.S. Stocks Retreat on Concerns About Europe Finances: Video

February 8, 2010

Feb. 8 (Bloomberg) — Bloomberg’s Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks slid and the Dow Jones Industrial Average closed below 10,000 for the first time since November amid concern that deteriorating European government finances will derail the economic recovery. (Source: Bloomberg)

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Gruebel Second Turnaround Means Battered UBS Stock May Trump Credit Suisse

February 8, 2010

By Elena Logutenkova Feb. 8 (Bloomberg) — UBS AG , the European bank with the biggest losses from the credit crisis, is poised for an earnings rebound that may help it catch up to Credit Suisse Group AG . Zurich-based UBS may report its first annual profit since 2006 this year after spinning off $38.7 billion in toxic assets into a central bank fund, cutting 18,500 jobs and appointing 11 new managers to the executive board, including a chief executive officer. The bank reports fourth-quarter 2009 earnings tomorrow. “UBS was a catastrophe,” said Eric Bendahan , who manages Banque Syz & Co.’s 1.8 billion-euro ($2.5 billion) Oyster European Opportunities Fund and counts UBS as one of his three largest holdings. “But if things get back to normal, the potential is colossal, while Credit Suisse did its job so well that its potential in the future is much smaller.” The man UBS is counting on to bring it back to health is CEO Oswald Gruebel , 66, who led a turnaround at Credit Suisse before retiring in 2007. Hired to run UBS almost a year ago, he’s relying on a recovery at its investment bank to help increase pretax earnings to 15 billion Swiss francs ($14 billion) in three to five years. Credit Suisse, which will probably report record earnings at its securities unit for 2009 on Feb. 11, may find it harder to increase profits as competitors sidelined by the financial crisis, such as UBS, return to the market. ‘Positively Surprise’ A recovery in profit may help UBS shares play catch-up, analysts said. The stock has fallen 6.5 percent in Swiss trading since the end of 2008 and trades at 1.24 times book value, about half the average of 2.56 times since 1997. Credit Suisse stock rose 55 percent in the same period and trades at 1.35 times book value, compared with an average of 1.74 times since 1990, Bloomberg data show. This year both UBS and Credit Suisse are down 14 percent. “There is a much greater scope for UBS to positively surprise than for Credit Suisse,” said Matthew Clark , a London- based analyst at Keefe Bruyette & Woods Ltd., who rates UBS “outperform” and Credit Suisse “market perform.” UBS, Switzerland’s largest bank by assets, may earn net income of 5.51 billion francs this year, according to the median estimate of 20 analysts surveyed by Bloomberg. The bank reported a 21.3 billion-franc loss in 2008, the biggest in Swiss corporate history. Credit Suisse, its largest Swiss rival, may eke out a 2.8 percent increase in profit to 7.6 billion francs in 2010, according to analysts. Sabine Jaenecke , a spokeswoman at UBS, and Credit Suisse spokesman Marc Dosch declined to comment. Madoff Avoidance Gruebel, a war orphan raised by his grandparents in East Germany, worked at Credit Suisse for 37 years. He moved to West Germany when he was ten to live with relatives and got into banking after school as a trainee at Deutsche Bank AG . At Credit Suisse, Gruebel, who has no university education, rose through the ranks from the bank’s Eurobond trading desk. In the three years after he took over as sole CEO in 2004, Gruebel doubled Credit Suisse’s profit and share price. It was under his watch in 2006 that the bank started cutting its holdings of U.S. subprime mortgage bonds, while UBS was still buying them. In private banking, he revamped product offerings in the late 1990s to include more hedge funds and alternative investments, and he advised clients to pull funds from Bernard Madoff ’s firm after a meeting with him in 2000. Client Redemptions At UBS, Gruebel, known as “Ossie,” has taken a similar hands-on approach by picking new management for the unprofitable investment bank and starting weekly calls with top risk officers. He aims to reduce annual costs by at least 3.5 billion francs this year from 2008 levels after cutting jobs, ending employee perks such as gym subsidies and getting rid of duplication in support functions. He also sold UBS’s Brazil unit and raised 3.8 billion francs from investors to boost capital. UBS may report fourth-quarter net income of 416 million francs, according to the median estimate of 14 analysts surveyed by Bloomberg. That would be its first quarterly profit in more than a year. Gruebel has said he expects a return to profitability will help UBS solve its biggest problem: withdrawals by wealthy clients who have removed a net 182.9 billion francs over the past six quarters. In a memo to staff last month, he described halting outflows as “imperative.” Redemptions may have slowed to 17.5 billion francs in the fourth quarter from 26.6 billion francs in the previous three months and 58.2 billion francs in the year-ago period, analysts estimated. ‘Biggest Risk’ The question of outflows at UBS’s private bank, once the world’s biggest manager of money for the wealthy, must be resolved, KBW’s Clark said. The Swiss administrative court muddied the picture last month by blocking the government from passing data to U.S. authorities on certain accounts, endangering an accord reached last year to settle a lawsuit against UBS related to alleged tax evasion by American clients. Swiss Justice Minister Eveline Widmer-Schlumpf said on Jan. 27 that the government will work with the U.S. to save the deal. Also at risk is the deferred prosecution agreement that UBS signed in February 2009 to avoid criminal charges, she said. A criminal prosecution in the U.S. could lead to the bank’s insolvency and endanger the Swiss economy, the government said. “UBS for sure has the biggest potential, but it also implies the biggest risk,” said Raoul Paglia , who helps manage about $80 billion at BSI SA in Lugano, Switzerland, and added more UBS shares than those of Credit Suisse to his Swiss equities fund at the end of last year. “The U.S. issue needs to be solved if we want to see UBS recover,” he said. “But once that’s out of the way, the stock has upside potential of almost 50 percent. So it’s worth it.” ‘Show Me First’ Of the 30 analysts who issued a recommendation on UBS over the past three months, only 30 percent advised buying the shares, compared with 70 percent for Credit Suisse, data compiled by Bloomberg show. “This distrust by analysts and the markets is explained by the fact that they took a lot of hits,” Banque Syz’s Bendahan said. “ Historically everyone loved UBS. Now people like Gruebel’s team but have a tendency to say, ‘Show me first. Show me that the restructuring is working.’” JPMorgan Chase & Co. analysts, led by Kian Abouhossein , last week raised their recommendation on UBS shares to “overweight” from “neutral,” saying the current valuation is attractive compared with their target price of 20 francs. At its current stock price of 13.88 francs investors are valuing UBS’s investment bank at almost nothing, they said. UBS last month appointed Rajeev Misra and Dimitri Psyllidis , who previously worked for Deutsche Bank and Merrill Lynch & Co., respectively, to co-run the debt-trading unit. That division was responsible for the majority of the $57.3 billion in losses UBS amassed in the credit crisis. Debt Trading Credit Suisse, which got 88 percent of its pretax profit in the first nine months of 2009 from its investment bank, may be harder hit if global securities revenue falls this year. Sanford C. Bernstein analysts, including Dirk Hoffmann-Becking , forecast that fixed-income revenue globally may drop about 30 percent this year from 2009 as increased competition shrinks the gap between bid and offer prices. Credit Suisse got about 36 percent of its total revenue from the debt-trading unit in the first nine months of 2009. UBS’s fixed-income unit had its first positive revenue in the third quarter of 2009 after eight quarters of losses, as the bank brought in 200 new hires. It missed out on a credit market rally in the first half of the year. “Overall it’s going to be hard for Credit Suisse to boost profits,” KBW’s Clark said. “UBS is clearly in the middle of a challenging turnaround, but then it’s got a capable management, which has delivered a challenging turnaround before. Back in 2004 Credit Suisse’s investment bank was a bit of an also-ran, and yet in a couple of years it was turned around to a credible leading player.” To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

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Brett King: Banking’s biggest challenge – Marketing 2.0

February 7, 2010

There are some massive changes occurring in the banking space today, but none so dramatic as what is happening in marketing and advertising. Direct mail offerings have been declining rapidly since 2006. In 2009, less direct mail was sent by banks than in the year 2000. Direct mail has declined 32 per cent since 2007 alone. In 2008 the Internet surpassed all media except television as the primary source for national and international news; this has taken its toll. In March 2009, the Seattle Post-Intelligencier or the “PI” as it was known, a 146-year old newspaper, closed down, citing rising costs, falling revenues and declining circulation. Since just January 2008, at last count, 55 regional newspapers in Britain have folded. Of the top 25 newspapers in the U.S. in 1990 (the year newspaper employment peaked), 20 of those newspapers have seen declines (on average reporting circulation down by more than 30per cent), and two have been closed down or declared bankrupt. New York Times reported a 30 per cent fall in advertising revenue, resulting in a $35.6 million loss for the 2009 third quarter alone. In 2009 TV advertising revenues in Australia fell by more than 12.6 per cent in the first half of the year. In the first quarter of 2009, the U.S. recorded losses of more than 14 per cent in TV ad revenues in normally stable locations such as the Bay Area and New York, and is expected to suffer a total decline of 22 per cent for the year. Declines of 27 per cent and more were recorded in radio ad spend for the U.S. for the first half, even worse than the decline in TVCs. Yet, in a recent report commissioned by UK’s OFCOM forecast the value of TV ads in the U.K. could fall from GBP 3.16bn in 2007 to just GBP 520m in 12 years’ time. That’s an 83 per cent decline. A location-based offer at the retail point-of-sale is at least 500% more effective than Direct Mail Bank’s are finding their brands are no longer able to just get by with brand marketing, after all BofA and Citibank have great brand marketing, but are being hammered by customers on Twitter, YouTube and elsewhere. Thus I find it amusing that ‘digital’ or interactive marketing still makes up only a fraction of marketing budgets for banks in 2010. The very fact that banks separate ‘digital’ in respect to budget or spend, signifies the challenges of changing a culture that is so dependent on direct mail, print, radio and TV – all broadcast mechanisms. Let’s play Devil’s advocate for a moment. What will the advertising space look like in 5-10 years? It’s more than likely that TVCs will be gone – with declines in revenue we’ll have to find another way to pay for TV either through subscription or download, but there is no business model that indicates Free-to-air TV can survive with out Ad revenue. Direct Mail will be relegated to very specific segments, and then only for loyalty promotions. Newspapers will be on iThingys with paywalls – we’ll subscribe to newspapers and virtually every newspaper will be digital. Billboards will be all digital, but not based on TVCs – they have to be even more efficient. Physical magazines will be a luxury item, most magazines will be digital. In this space nearly ALL advertising will be digital within 10 years. TiVo already strips out TVCs. SPAM filters on our phones and email ensure the eDM ain’t going to work. We need something more. In my book BANK 2.0 I call this “Point-of-Impact” marketing. Banks need to insert their ‘value’ message into the transaction where it will have an effect, not send out millions of messages hoping for ‘brand recall’. Brand marketing will still exist, but campaign marketing needs to shift to point-of-impact . To illustrate, when you are on BA.com, United.com or CathayPacific.com and I’m booking a flight, that is where you need to sell me travel insurance. When I’m on a real-estate website, that is where you can target me with mortgage deals. When I walk into Bloomingdales, Marks and Spencer, or Armani Exchange send me a location-based MMS coupon on my mobile offering me a discount using a specific card. Get me when I’m interested, when I need it. But this requires a complete rethink of the structure of the marketing department, and a complete new set of tools. This is the biggest fundamental change to the marketing department of the bank… well ever . I’m not surprised that quite a few of the banks I’m talking to are not sure how to make this transition, but that doesn’t make it any less likely.

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Video: Merkle Says Toyota Disclosures `Damaging’ for Consumers: Video

February 5, 2010

Feb. 5 (Bloomberg) — Erich Merkle, president of consultant Autoconomy LLC, talks with Bloomberg’s Erik Schatzker and Deirdre Bolton about Toyota Motor Corp.’s recall of millions of vehicles due to unintended acceleration. Toyota President Akio Toyoda apologized today for the carmaker’s growing recall crisis in his first scheduled public appearance since the company halted U.S. sales and production of its best-selling models last month. (Source: Bloomberg)

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Stocks Sink To Lowest In 3 Months: Here’s Why

February 4, 2010

NEW YORK — Stocks buckled Thursday under the growing belief that the global economy is weaker than many investors expected and likely to stop companies from hiring. The Dow Jones industrials briefly traded below 10,000 for the first time in three months. A flood of bad news, including rising debt levels in European nations and an unexpected jump in the number of Americans filing for unemployment benefits, had investors pulling money out of assets like stocks and commodities that look increasingly risky. Fears of more disappointing news Friday, when the government issues its January employment report, contributed to the slide. Demand for safer investments sent the dollar and Treasurys higher and the euro falling. Major indexes skidded as much as 3.1 percent to their lowest levels in three months. The Dow fell 268 points and briefly traded below 10,000 for the first time since Nov. 6. The Dow’s 2.6 percent drop was its biggest in seven months. And it was the ninth time in 14 days that the Dow has moved by more than 100 points. Just 273 stocks rose on the New York Stock Exchange, while more than 2,800 fell. One of the weak performers was metals producer Freeport-McMoRan Copper & Gold Inc., which tumbled 5.3 percent. The few winners included Cisco Systems Inc. following a big increase in its earnings. Consolidated trading volume at the NYSE rose to 5.9 billion shares from 4.3 billion Wednesday. The day’s news reminded investors that the global economic recovery remains tenuous. It also raised questions about whether the market can resume its rebound from 12-year lows it hit last March. The slide began in Europe on concerns about onerous debt levels in Greece, Portugal and Spain. Worries about those countries set off broader concerns that governments will have difficulty containing rising debts and borrowing more money to help revive their economies. “The market is becoming aware that the wall of cash that lifted it last year is coming to an end,” said Jon Merriman, chief executive of Merriman Curhan Ford in San Francisco. The euro hit a seven-month low against the dollar on the news. The rising dollar hurt demand for commodities, which are priced in dollars and become more expensive to foreign buyers when the dollar climbs. Gold tumbled $49, or 4.4 percent. The drop in stocks was the latest leg of a stumble that began in mid-January. Stocks fell then in response to China’s attempts to curb its overheated growth. Those moves raised fears that the other world economies could suffer as a result. The pullback in stocks worsened as leaders in Washington said they would impose tighter regulations on U.S. banks. Investors also worry that a slowdown in foreign countries would spill over to the U.S. and make it harder for the economy to overcome its biggest problem: unemployment. The Labor Department said Thursday that claims for unemployment benefits rose by 8,000 to 480,000 last week. The news disappointed investors who had hoped for a drop. It was the fourth increase in the past five weeks. The jobless claims numbers chilled expectations that the government’s January jobs report would show that employers added workers in the first month of the year. Analysts expect Friday’s report to show that employers added 5,000 jobs in January. The government is also expected to report that the unemployment rate ticked up to 10.1 percent from 10 percent. “You’ve got the recipe for a market in which my screen is entirely red,” said Bernie McSherry, senior vice president of strategic initiatives at Cuttone & Co. in New York. The Dow fell 268.37, or 2.6 percent, to 10,002.18. The Dow has fallen 723 points, or 6.7 percent, since closing at a 15-month high of 10,725.43 on Jan. 19. The broader Standard & Poor’s 500 index fell 34.17, or 3.1 percent, to 1,063.11, its steepest drop since April 20, 2009. The Nasdaq composite index slid 65.48, or 3 percent, to 2,125.43. In other trading, bond prices rose sharply, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.61 percent from 3.71 percent late Wednesday. The Chicago Board Options Exchange’s Volatility Index jumped 20.7 percent. An increase in the VIX, which is known as the market’s fear gauge, is a sign that investors predict more big moves in stocks. Demand for safety jumped as traders remained skeptical about Greece’s plan to slash its budget deficit from 12.7 percent of the nation’s gross domestic product in 2009 to less than 3 percent in 2012. Meanwhile, Portugal on Wednesday cut a planned treasury bill issue. And Spain said its deficits will be more than anticipated in the coming three years. Charles Norton, portfolio manager of the ALPS/GNI Long-Short Fund, said the renewed questions about foreign governments’ ability to finance their deficits are a sign that investors have been too optimistic in predicting a recovery in the world’s economies. Norton said signs of improvement in the U.S. economy are less impressive than they first appear. The government said last week that the economy grew at an annual rate of 5.7 percent during the fourth quarter. A big part of that gain came from companies rebuilding inventories. “They are the only sources of economic activity that we’ve seen so far,” Norton said. “They’re both likely to wane over the course of this year. Then what’s left?” The bad news on employment and European government debt overshadowed pockets of better-than-expected sales reports from some U.S. retailers. Macy’s Inc. raised its profit forecast after sales rose. The rise in the dollar hit commodity prices and stocks of companies that produce them. Crude oil fell $3.84 to settle at $73.14 per barrel on the New York Mercantile Exchange. It was the biggest one-day drop in four months. Aluminum producer Alcoa Inc. fell 58 cents, or 4.3 percent, to $12.91, while Freeport-McMoRan fell $3.72, or 5.3 percent, to $66.74. Cisco rose 9 cents, or 0.4 percent, to $23.16. Macy’s rose 43 cents, or 2.7 percent, to $16.67. Energy stocks fell as oil slid. Exxon Mobil Corp. fell $1.88, or 2.8 percent, to $64.72, while Chevron Corp. fell $1.84, or 2.5 percent, to $71.37. The Russell 2000 index of smaller companies fell 20.98, or 3.4 percent, to 589.68. Britain’s FTSE 100 dropped 2.2 percent, Germany’s DAX index slid 2.5 percent, and France’s CAC-40 lost 2.8 percent. Japan’s Nikkei stock average fell 0.5 percent.

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Retail sales in Australia declined for the first time in five months

February 4, 2010

Retail sales in Australia declined for the first time in five months

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Asian Stocks, Currencies Fall on Concern Economic Recovery May Be Derailed

February 3, 2010

By Linus Chua and Chan Tien Hin Feb. 4 (Bloomberg) — Asian stocks and currencies fell on concerns the region’s economic recovery may be derailed after Australian retail sales unexpectedly fell and New Zealand’s jobless rate rose to the highest level in more than 10 years. The MSCI Asia Pacific Index lost 0.8 percent to 117.62 as of 12:40 p.m. in Tokyo. The Australian dollar dropped to a six- week low, the New Zealand currency slid to the weakest since September, and South Korea’s won declined for the first time in three days. Standard & Poor’s 500 Index futures fell 0.1 percent. Australian retail sales decreased for the first time in five months and New Zealand’s unemployment soared to 7.3 percent in the fourth quarter. The data raised investors’ concerns that the Asian benchmark stock index’s 34 percent gain last year won’t be sustained as economic growth slows. “The market optimism is misplaced. It doesn’t reveal the true depth of the problem of unemployment rates and the true picture of the structural problems of overconsumption,” said Scott Lim , who helps oversee $670 million as chief executive officer of MIDF Amanah Asset Management Bhd. in Kuala Lumpur. “This is going to be tough year, a reckoning year that we have going into an era of depressing times ahead.” Japan’s Nikkei 225 Stock Average dropped 0.6 percent and Hong Kong’s Hang Seng Index declined 1 percent. Australia’s S&P/ASX 200 Index slipped 0.7 percent. BHP Billiton Ltd. , the nation’s biggest oil producer and the world’s biggest mining company, dropped 1.7 percent to A$40.80. Rio Tinto Ltd. , the world’s third-biggest mining company, lost 2.5 percent to A$70.19. Toyota, Honda Toyota Motor Corp. fell 4.1 percent to 3,260 yen after Bloomberg News reported that the Prius hybrid may be recalled in Japan after the government ordered an investigation of brake problems. Outside of Japan, nearly 8 million Toyota vehicles have been recalled to fix problems linked to unintended acceleration. Rival Honda Motor Co. rose 2.1 percent to 3,205 yen as it increased its full-year profit forecast by 71 percent because of a weaker yen. Australia’s dollar fell 0.2 percent to 88.17 U.S. cents, while the New Zealand dollar declined as low as 69.68 U.S. cents. The won dropped 0.4 percent to 1,153.52 per dollar. “Signals remain mixed about the strength of economic recovery,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “A tug of war seems to be occurring between fundamentals and liquidity at the moment.” Dollar, Treasures Gain The dollar and Treasuries gained as concern European sovereigns will struggle to reduce deficits and the economic recovery in Asia will slow boosted demand for the safest assets. The greenback advanced against the euro and the yen strengthened against 12 of its 16 most-traded counterparts following economic data from Australia and Zealand, boosting demand for Japan’s currency as a refuge. The dollar climbed to as high as $1.3867 per euro in Tokyo from $1.3893 in New York yesterday. The benchmark 10-year Treasury note yielded 3.70 percent, according to BGCantor Market Data. Copper for three-month delivery advanced 0.6 percent to $6,631 a metric ton after slumping 3.3 percent yesterday. The metal used in homes, cars and appliances dropped to $6,525 a ton yesterday, the lowest level since Nov. 13. Aluminum increased 0.5 percent to $2,093.75 a ton. Crude oil traded near $77 a barrel in New York after dropping yesterday on a U.S. Energy Department report that showed a bigger-than-forecast increase in inventories as refineries idled units and imports climbed. Crude oil for March delivery traded at $76.80 a barrel, down 18 cents, in electronic trading on the New York Mercantile Exchange. To contact the reporters for this story: Linus Chua at lchua@bloomberg.net ; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

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Asian Stocks, Currencies Fall on Concern Economic Recovery May Be Derailed

February 3, 2010

By Linus Chua and Chan Tien Hin Feb. 4 (Bloomberg) — Asian stocks and currencies fell on concerns the region’s economic recovery may be derailed after Australian retail sales unexpectedly fell and New Zealand’s jobless rate rose to the highest level in more than 10 years. The MSCI Asia Pacific Index lost 0.8 percent to 117.62 as of 12:40 p.m. in Tokyo. The Australian dollar dropped to a six- week low, the New Zealand currency slid to the weakest since September, and South Korea’s won declined for the first time in three days. Standard & Poor’s 500 Index futures fell 0.1 percent. Australian retail sales decreased for the first time in five months and New Zealand’s unemployment soared to 7.3 percent in the fourth quarter. The data raised investors’ concerns that the Asian benchmark stock index’s 34 percent gain last year won’t be sustained as economic growth slows. “The market optimism is misplaced. It doesn’t reveal the true depth of the problem of unemployment rates and the true picture of the structural problems of overconsumption,” said Scott Lim , who helps oversee $670 million as chief executive officer of MIDF Amanah Asset Management Bhd. in Kuala Lumpur. “This is going to be tough year, a reckoning year that we have going into an era of depressing times ahead.” Japan’s Nikkei 225 Stock Average dropped 0.6 percent and Hong Kong’s Hang Seng Index declined 1 percent. Australia’s S&P/ASX 200 Index slipped 0.7 percent. BHP Billiton Ltd. , the nation’s biggest oil producer and the world’s biggest mining company, dropped 1.7 percent to A$40.80. Rio Tinto Ltd. , the world’s third-biggest mining company, lost 2.5 percent to A$70.19. Toyota, Honda Toyota Motor Corp. fell 4.1 percent to 3,260 yen after Bloomberg News reported that the Prius hybrid may be recalled in Japan after the government ordered an investigation of brake problems. Outside of Japan, nearly 8 million Toyota vehicles have been recalled to fix problems linked to unintended acceleration. Rival Honda Motor Co. rose 2.1 percent to 3,205 yen as it increased its full-year profit forecast by 71 percent because of a weaker yen. Australia’s dollar fell 0.2 percent to 88.17 U.S. cents, while the New Zealand dollar declined as low as 69.68 U.S. cents. The won dropped 0.4 percent to 1,153.52 per dollar. “Signals remain mixed about the strength of economic recovery,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “A tug of war seems to be occurring between fundamentals and liquidity at the moment.” Dollar, Treasures Gain The dollar and Treasuries gained as concern European sovereigns will struggle to reduce deficits and the economic recovery in Asia will slow boosted demand for the safest assets. The greenback advanced against the euro and the yen strengthened against 12 of its 16 most-traded counterparts following economic data from Australia and Zealand, boosting demand for Japan’s currency as a refuge. The dollar climbed to as high as $1.3867 per euro in Tokyo from $1.3893 in New York yesterday. The benchmark 10-year Treasury note yielded 3.70 percent, according to BGCantor Market Data. Copper for three-month delivery advanced 0.6 percent to $6,631 a metric ton after slumping 3.3 percent yesterday. The metal used in homes, cars and appliances dropped to $6,525 a ton yesterday, the lowest level since Nov. 13. Aluminum increased 0.5 percent to $2,093.75 a ton. Crude oil traded near $77 a barrel in New York after dropping yesterday on a U.S. Energy Department report that showed a bigger-than-forecast increase in inventories as refineries idled units and imports climbed. Crude oil for March delivery traded at $76.80 a barrel, down 18 cents, in electronic trading on the New York Mercantile Exchange. To contact the reporters for this story: Linus Chua at lchua@bloomberg.net ; Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

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Stronger Yuan Must Precede Chinese Rate Increase, State Economist Zuo Says

February 3, 2010

By Bloomberg News Feb. 4 (Bloomberg) — China should let the yuan strengthen before raising interest rates, to avoid fueling inflows of capital that may stoke inflation, government economist Zuo Chuanchang said. “Raising interest rates while keeping the yuan’s exchange- rate fixed would only attract more capital,” Zuo, a researcher at the Academy of Macroeconomic Research, said in a Feb. 2 interview in Beijing. Investors would pump more money into the nation, seeking future currency gains, he said. Chinese officials aim to limit price surges that could undermine the recovery of the world’s fastest-growing major economy. The People’s Bank of China said last week that accelerating inflation will complicate policies in 2010 and central bank adviser Fan Gang said Feb. 1 that asset bubbles are “the real worry.” China has kept the yuan at about 6.83 per dollar since July 2008 to aid exporters, after a 21 percent gain in the previous three years. The central bank may raise the benchmark lending rate by 27 basis points to 5.58 percent next quarter, according to the median forecast in a Bloomberg News survey of 17 economists on Jan. 21. Consumer prices rose a more-than-forecast 1.9 percent in December from a year earlier and may climb 3 percent this month, according to Nomura Holdings Inc. Unprecedented growth in credit has driven the nation’s recovery from the financial crisis. Speculative Inflows “Allowing the currency to move may help deter some of the speculative inflows, thus making monetary tightening measures more effective,” said Zuo, whose academy is an affiliate of the Beijing-based National Development and Reform Commission, the nation’s top planning agency. China’s economy expanded 10.7 percent in the fourth quarter from a year earlier, the fastest pace since 2007. The Shanghai Composite Index climbed 80 percent in 2009 and declines this year have been driven by concern that monetary tightening may hurt profits. “China’s strong recovery will continue to attract investors as well as speculative funds, so the liquidity pressure will keep building unless the government relaxes controls on the currency,” Zuo said. China’s foreign-exchange reserves , the world’s largest, surged 23 percent to $2.4 trillion last year, government data show. Part of the buildup is from inflows of hot money, or short-term speculative capital, that has made the nation’s stock and property markets more volatile, central bank adviser Fan said on Dec. 28. The central bank unexpectedly asked lenders to set aside more money as reserves on Jan. 12, the first increase since June 2008, after state media reported lending of about 100 billion yuan a day in the first week of this year. Authorities imposed even higher reserve ratios on lenders including China Citic Bank Corp., Bank of Communications Ltd. and Bank of China Ltd. to limit their loan growth, Reuters reported. The faster recovery of emerging economies and low interest rates in the U.S. and Europe will continue to drive liquidity to nations such as China, according to Fan, the academic member of the central bank’s monetary policy committee. — Li Yanping . Editors: Paul Panckhurst , Cherian Thomas . To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

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New Zealand Unemployment Soars to 10-Year High; Currency Tumbles on Rates

February 3, 2010

By Tracy Withers Feb. 4 (Bloomberg) — New Zealand’s unemployment soared to the highest level in more than 10 years as a surge of immigrants failed to find jobs. The currency fell as traders bet the central bank will have to delay a planned mid-year rate increase. The jobless rate rose to 7.3 percent in the fourth quarter from 6.5 percent in the previous three months, Statistics New Zealand said in Wellington today. The median of 10 estimates in a Bloomberg News survey was for 6.8 percent. Unemployment now exceeds the peak forecast by both Finance Minister Bill English and Reserve Bank Governor Alan Bollard as the economy battles to emerge from its worst recession in three decades. The currency dropped to the lowest in more than four months as investors bet Bollard may keep the official cash rate at a record-low of 2.5 percent until the second half of the year. “The weakness in today’s data raises the real possibility that the Reserve Bank waits beyond June to begin hiking,” said Philip Borkin , an economist at Goldman Sachs JBWere Ltd. in Auckland. Bollard said last week he expected to raise borrowing costs “around the middle of 2010.” New Zealand’s dollar fell to 69.82 U.S. cents at 12:05 p.m. in Wellington from 70.61 cents immediately before the release. The currency is its lowest since Sep. 14. Exporters Struggle Exporters such as Cedenco Foods Ltd. and Winstone Pulp International Ltd. closed plants last year, citing increasing costs and the affect of the rising currency on returns. In July, Cedenco said it would shut a vegetable processing plant in Gisborne at a cost of 125 jobs. In October, Winstone said it couldn’t keep a South Island lumber mill open, leaving 110 workers out of jobs. New Zealand’s immigration growth in 2009 was the highest in more than five years, Statistics New Zealand said in a second report today. The surge in net immigration has been boosted by fewer New Zealanders heading abroad. About 41,600 citizens left last year, the lowest calendar year tally since 2003. The Reserve Bank on Dec. 10 forecast a peak jobless rate of 6.7 percent in the second quarter. Bollard said last week he didn’t expect to raise the benchmark interest rate until the middle of 2010 because business spending remained weak. English, who expected the jobless rate would rise to about 7 percent, said this week any subsequent decline may be gradual because companies will give existing employees more hours rather than hire extra workers. Hours Reduced Total actual hours worked per week declined for a sixth quarter, dropping 0.4 percent to the lowest level in more than five years, today’s report showed. Companies such as Fisher & Paykel Appliances Holdings Ltd ., the nation’s largest maker of refrigerators and washing machines, last year took advantage of government subsidies to work a nine- day fortnight and save about 60 jobs. The jobless rate has risen from 5 percent in the first quarter last year, which signaled the end of the nation’s worst recession in three decades. “As most economists will tell you, employment almost always lags behind economic growth, but we’re not out of the woods yet,” Employment Minister Paula Bennett said in an e- mailed statement. Companies are optimistic about the economy’s recovery in the next six months, although most expect profits will fall in the first quarter, according to a New Zealand Institute of Economic Research Inc. survey published last month. The number of firms expecting to hire workers in the first quarter barely exceeded the number planning to reduce staff, the Wellington-based institute said. Growth Forecast The Reserve Bank expects the economy will grow 3.1 percent this year after contracting 1.4 percent in 2009. Employment may increase about 0.6 percent this year, it said. Employment declined 0.1 percent or about 2,000 jobs in the fourth quarter, matching economists’ median expectation, today’s report showed. Employment shrank 2.4 percent from a year earlier. The number of people out of work rose 18,000 from the third quarter to a 16-year high of 168,000. About 2.3 million of New Zealand’s 4.4 million people are in the workforce. The surge in unemployment reflects more people looking for jobs but unable to find them, the statistics agency said. The participation rate , which measures the proportion of the working age population employed or seeking employment, rose to 68.1 percent from 68 percent in the third quarter, matching analysts’ median expectation. Full-time employment fell by 6,000 jobs, or 0.3 percent, in the fourth quarter after seasonal adjustment. Part-time employment was unchanged. Statistics New Zealand adjusts the full-time and part-time employment figures separately, which means they may not add up to the total change in employment. The rising unemployment rate removes pressure on employers to pay higher wages and eases inflation. Wages for non- government workers rose 1.5 percent in the fourth quarter from a year earlier, the slowest pace in nine years, the statistics agency said this week. To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net .

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Communications Expert Calls Toyota’s Recall ‘The Worst-Handled Auto Recall In History’

February 3, 2010

If you Google Toyota, among the first things that pop up is an ad slugged “Toyota Recall News.” That’s accompanied by links to Toyota.com and a Web site about the new Prius. With just a few more clicks, you’ll find hundreds of news reports that the car company’s faulty accelerators have been linked to 19 deaths.

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Imperial Capital Postpones IPO in Second Delay by a U.S. Company This Year

February 3, 2010

By Michael Tsang Feb. 3 (Bloomberg) — Imperial Capital Group Inc. postponed its $113 million initial public offering, becoming the second U.S. company to shelve an IPO in 2010. The Los Angeles-based investment bank that specializes in high-yield and distressed debt planned to sell 6.67 million shares at $15 to $17 each in its scheduled IPO yesterday, according to Bloomberg data. The initial offering would have been the first by an investment bank in two years. The postponement comes after two of the first three IPOs of 2010 fell more than the Standard & Poor’s 500 Index, which dropped by the most in a year in January. Ironwood Pharmaceuticals Inc. cut the size of its offering by 30 percent yesterday in the biggest price reduction for an IPO this year. Imperial Capital had sought $4.69 per dollar of so-called tangible book value in its share sale, three times the median for publicly traded investment banks. Bank of America Corp. of Charlotte, North Carolina, JMP Group Inc. in San Francisco and Imperial Capital were the lead underwriters for the sale. Terreno Realty Corp. of San Francisco became the first U.S. company to shelve its IPO in 2010 last week as the S&P 500 extended its January slump to 3.7 percent, the biggest monthly decline since the gauge’s 62 percent surge began in March 2009. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

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Union Ally Opposed by Business Vows to Be `Practical’ on U.S. Labor Board

February 3, 2010

By Holly Rosenkrantz Feb. 3 (Bloomberg) — Craig Becker, a union ally nominated by President Barack Obama to the National Labor Relations Board, told lawmakers he won’t try to use his position to make changes to labor laws opposed by business groups. Becker, a Chicago-based associate general counsel for the Service Employees International Union and the AFL-CIO, said during a Senate hearing yesterday that his argument in the past that union-election rules should be rewritten to favor labor were the views of a “scholar.” “If confirmed, my decisions, unlike the views of a scholar, will have practical, concrete and important consequences,” he told members of the Senate Health, Education, Labor and Pension Committee. “I will have a duty to implement the intent of Congress.” Becker’s views have been an issue for business groups because he has the potential to shape labor laws through rulings on the labor board, created in 1935 to remedy unfair labor practices and certify union elections. The National Association of Manufacturers and the U.S. Chamber of Commerce were among business groups opposing Becker’s nomination last year because of his pro-union stance. To address those concerns, the Senate committee held the first hearing since 1993 for a labor board nominee. Critics shouldn’t object to Becker “simply because he was a union lawyer — and a good one,” said Senator Tom Harkin , an Iowa Democrat. Republican Senator John McCain of Arizona said he hoped Becker would recuse himself if confirmed from any case involving the SEIU, a labor union that spent $80 million to help elect Obama. Becker said he would recuse himself from such cases for two years if confirmed. McCain, who blocked Becker’s nomination last year, said in an interview he may do so again this year. Panel Vacancies The five-member panel has had three vacancies for more than two years, and has almost 200 cases pending, including one involving MGM Mirage’s New York-New York casino. The MGM Mirage case, which may affect hotels, shopping centers and casinos, would decide whether workers are allowed to distribute union literature at a businesses’ entrance. Becker wrote a 1993 Minnesota Law Review article saying that union-election rules should be rewritten in favor of labor, and that the NLRB can do this through regulation, without the consent of Congress. Business groups also oppose Becker’s role in advising Obama’s transition team while still performing work for SEIU and the AFL-CIO, the nation’s largest union group. “It’s the first time someone employed by a labor union would move directly” to the board, Michael Eastman , executive director of labor law policy at the Chamber of Commerce, told reporters after the hearing. Eastman said he expected at least one Republican Senator beside McCain to block Becker’s confirmation. The labor board has three members of the president’s political party and two members of the opposition party. Becker must be confirmed by the full Senate. To contact the reporter on this story: Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net .

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Barry D. Wood: Poland as Number One

February 2, 2010

Poland is the Cinderella of the world economy. A ruin of decayed communism 20 years ago, Poland by the late 90s was among Europe’s fastest growing economies. In 2009 it was the only European economy to register growth. What accounts for this miracle is inspired leadership, bold action, and persistence in implementing rigorous market based reforms. It’s easy to forget how bad things were in Poland in 1989. In the months before the Berlin Wall came down, Poland’s chaotic command economy imploded. Shortages were rampant. There was hyperinflation. Led by the Solidarity trade union, people were in revolt. Forced to agree to Poland’s first free elections in 40 years, the Communists lost and an elected non-Communist government took over. It was a tense and dangerous time where wild optimism was balanced by fear of Soviet intervention. In the midst of turmoil, in September 1989, Leszek Balcerowicz, a slender 42-year-old economist with an MBA from St. John’s University, came to Washington seeking help. In a memorable press conference in the musty, seldom-used ballroom of the Polish embassy, Balcerowicz outlined an astonishing plan for quickly converting Poland’s communist system into a western style market economy. Jointly developed with Jeffrey Sachs, then a top economist at Harvard, the Balcerowicz Plan had two components, stabilization and institutional reform. The immediate need was food aid, debt relief and emergency loans. Then, hyperinflation would be halted by monetary restraint. Prices, for decades set by government bureaucrats, would be freed and determined by market forces. Protected state enterprises would have to compete with imported goods. Polish citizens would gain access to credit and be allowed to start businesses. Poland’s big bang drive to build a market economy was launched January 1, 1990. Aware that the reforms would be painful, Balcerowicz believed that given enough time shock therapy would succeed. “We are starting,” he said, “in extremely difficult conditions…(but) we are determined to go ahead.” Sachs said, “It was a terrifying and unpredictable period.” As expected, the first months were hard. Unemployment soared as industrial subsidies were cut. Living standards fell and poverty jumped as prices rose faster than wages. But fresh fruit and goods of all kinds began to fill empty shelves, boosting confidence that the plan might be working. Curbs on government spending and monetary discipline brought down inflation. The new government stuck with the program. Two years later, the transition recession ended and an entrepreneurial Poland was registering rapid growth. By the mid-90s, growth reached 5% and Poland became the first post-communist economy to match the living standards that prevailed ten years earlier. Democracy became entrenched as elected governments came and went, but the reforms persisted. Poland joined NATO, and in 2004 the European Union. Annual growth rates well above those of Western Europe began to narrow the income gap with the west. Today, Poland is Europe’s 6th and the world’s 18th largest economy. Proud of his country’s achievements, conservative prime minister Donald Tusk told the Financial Times (January 27th) that Poland’s success is based “on the fundamental values of freedom, private property, competitiveness, and a limited role of the state.” Tusk’s government is raising the retirement age and pushing down the budget deficit so that Poland will qualify for membership in the Euro currency zone. Balcerowicz, too, is proud of what’s been accomplished. He credits monetary discipline with helping Poland avoid the housing bubbles that swept through the three neighboring Baltic States, resulting in their economies registering 15% declines while Poland grew by over 1.5% in 2009. Looking back, Sachs says he is “thrilled that the Poles acquitted themselves so beautifully in the pages of history.”

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BNY Mellon Agrees to Acquire PNC’s Global Investment Unit for $2.3 Billion

February 2, 2010

By Colleen McElroy Feb. 2 (Bloomberg) — BNY Mellon announced a definitive agreement to acquire PNC’s Global Investment Servicing Inc. business, a provider of custody, fund accounting, transfer agency and outsourcing solutions for asset managers and financial advisors. The purchase price of $2.31 billion includes the purchase of $1.57 billion of stock and repayment of intercompany debt from PNC. BNY Mellon plans to raise $800 million in equity as part of the transaction. The all-cash acquisition, which will be accretive in the first year, is expected to close in the third quarter of 2010.

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Kim Jong Il Doubles North Korea Factory Visits to Prop Up Failing Economy

February 1, 2010

By Bomi Lim Feb. 2 (Bloomberg) — North Korean leader Kim Jong Il has doubled the number of trips he makes to factories and power stations, signaling his regime’s growing efforts to prop up a failing economy hit by United Nations sanctions. Half of the 20 visits Kim made in January were to economic projects, more than double the four economy-related trips he made a year earlier, according to South Korea’s Unification Ministry . Kim made a total of 13 outings in January 2009. “It clearly shows how Kim Jong Il wants to show his people his eagerness to overcome economic difficulties,” said Kim Yong Hyun, professor of North Korean studies at Dongguk University in Seoul. “He wants to tell them the leader himself will be at the forefront of improving their livelihoods, which have obviously got worse.” North Korea, which releases no economic data, is hobbled by UN Security Council sanctions on cross-border financial transactions, curbs that were toughened after Kim’s government carried out tests of missiles and nuclear devices in 2009. South Korea’s central bank estimates the North’s 2008 gross domestic product at 21.5 trillion won ($18.4 billion). Kim, 68, braved temperatures of minus 30 degrees Celsius (minus 22 degrees Fahrenheit) to tour a power station under construction in Huichon, North Korea’s official Korean Central News Agency said on Jan. 3 in reporting his first trip of the year. He visited a flour-processing factory in Pyongyang and ordered that machinery be modernized to enable increased production of bread, biscuits and noodles, KCNA said Jan. 23. 1990’s Famine Kim makes what his regime calls “field guidance” trips to military units, factories, farms and other sites to demonstrate his leadership. The Unification Ministry in Seoul tallies Kim’s public appearances by monitoring North Korean media reports. North Korea has been reliant on outside handouts to feed its 24 million people since the mid-1990s when famine caused by floods, drought and economic mismanagement is estimated to have killed about 2 million people. The North Korean government in December revalued its non- convertible currency for the first time in 17 years, targeting a black market that has challenged the ruling party’s control. Laws have also been changed to favor foreign investors, officials told a U.S. business delegation, when the officials also asked for economic contributions and investment. To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

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China’s Banking Regulator Said to Tell Lenders to Curtail Third Mortgages

February 1, 2010

By Bloomberg News Feb. 2 (Bloomberg) — China’s government, seeking to stem property speculation, told banks to raise interest rates on third mortgages and demand bigger down payments for such loans, a person with knowledge of the matter said. The China Banking Regulatory Commission warned lenders of the risks associated with “hot money” flowing into the property market, the person said, requesting anonymity because the agency hasn’t published the measures. Mortgage defaults in China are rising, the person said without giving figures. China’s $1.4 trillion of new lending last year ignited a real-estate boom, with prices in 70 cities rising at the fastest pace in 18 months in December. An index tracking property companies traded in Shanghai slumped to a nine-month low yesterday on concern the government will tighten real-estate credit to prevent a bubble from forming. “The CBRC will continue to enhance monitoring of the property market, timely remind banking institutions of risks, and guide banks to optimize loan structure and prevent lending risks by using regulatory indicators including capital adequacy ratio, loan provision ratio, liquidity ratio and down payments,” the watchdog said in an e-mailed statement. The regulator also told banks to stop granting new loans to developers found to be hoarding land or intentionally delaying property sales, and to take measures to make sure existing advances are repaid, the person said. China Tightening The State Council, China’s cabinet, said Jan. 10 it will step up guidance on property lending and seek to counter speculative capital from abroad to tackle “overly-rapid” price gains in some cities. It told banks to abide by a minimum 40 percent down-payment requirement for borrowers’ second mortgages and set interest rates according to risk assessments. In a Jan. 12 move that surprised economists, the central bank ordered lenders to set aside larger reserves for the first time since June 2008, the most drastic step so far to cool the economy. China’s economic growth accelerated to 10.7 percent in the fourth quarter, the fastest pace since 2007. Lenders extended 952 billion yuan ($139 billion) of home loans in the first nine months of 2009, a fourfold increase from a year earlier, according to the People’s Bank of China. The PBOC doesn’t break out second or third mortgages. Banks were told they should reject loan applications from people buying homes for “investment and speculation” purposes, the person said. Lenders were asked to raise down payments and interest rates for third mortgages by a “broad margin” if they’re unsure of a borrower’s intentions, the person said. Foreign Buyers The CBRC also said capital flows into Chinese assets have increased “noticeably” as investors engaged in so-called carry trades, according to the person. A carry trade involves borrowing in a country with low interest rates, converting the money into a currency where borrowing costs are higher, and lending the funds at a higher rate. Almost 40 percent of buyers of luxury residential properties worth more than 10 million yuan last year in Shanghai were from overseas, the person said. The CBRC found one case where 38 foreign citizens who never entered China managed to take out mortgages from a bank in Shanghai through their agents and lawyers, without providing necessary documentation, according to the person. To contact the reporter on this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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First California Introduces New Lending Teams

February 1, 2010

WESTLAKE VILLAGE, CA–(Marketwire – February 1, 2010) – First California Financial Group, Inc. ( NASDAQ : FCAL ) today announced that experienced lending teams with well established commercial clientele networks in Ventura County and the San Fernando Valley have joined its wholly-owned subsidiary, First California Bank. Stacy Peterson was appointed senior vice president and regional manager for Ventura County. David Sabedra was named senior vice president and will head First California’s Ventura office.

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Democrats Have More Campaign Cash Than Republicans for Off-Year Election

January 31, 2010

By Jonathan D. Salant and John McCormick Jan. 31 (Bloomberg) — Democratic Party committees entered an off-year election with more money in the bank than their Republican counterparts for the first time in at least 18 years, giving the party a financial boost as it tries to stave off a surge by the opposition. The Democratic National Committee and the fundraising arms of House and Senate Democrats reported $37.9 million in the bank as of Dec. 31, almost double the $19.4 million the Republicans had, Federal Election Commission filings show. The Democrats have never had more money than Republicans to spend at the beginning of an off-year election, according to FEC records that date to 1991, the first year the parties had to report unregulated corporate, union and individual donations. Such “soft money” donations were banned after the 2002 elections. “It means we’ve put together the resources to protect members and stay on offense,” Representative Chris Van Hollen , chairman of the Democratic Congressional Campaign Committee, said in an interview. While this is the first time since the 1993-94 election cycle that the Democrats control both the White House and Congress, Republicans have been invigorated by Scott Brown’s Jan. 19 win in Massachusetts to claim the U.S. Senate seat formerly held by the late Democrat Edward Kennedy. Financial Parity The Democratic National Committee entered the off-year election with more money than the Republican National Committee, $8.7 million to $8.4 million. The Republicans were debt-free, while the Democrats owed $4.7 million. Four years ago, the Republican committee had $34 million to the Democrats’ $6 million. “Without the White House, without the U.S. Senate, and without the Congress, we start 2010 with parity,” Republican National Committee Chairman Michael Steele told reporters in Honolulu. “And I think that’s a good spot for the party to be in.” The Republican National Committee spent $98 million last year as it helped fund winning candidates in the New Jersey and Virginia governors’ races. Brown’s capture of the Massachusetts senate seat ended the Democrats’ 60-vote majority, needed in that chamber to override efforts to block legislation. “Those two races set the stage for Massachusetts,” RNC Treasurer Randy Pullen, a national committee member from Arizona, said in an interview. “It was a great investment.” Resistance to Steele Even so, Steele has run into some opposition from party members. Republican fundraiser Wayne Berman said there is “resistance” to the chairman among some large donors. Steele has been criticized for writing a book about how to defeat Democrats without telling his party’s leadership, for saying Republicans wouldn’t win back the House of Representatives and for criticizing the rhetoric of conservative talk radio host Rush Limbaugh. Steele, the first black to hold the post, said he would seek another term as chairman, while saying “my style is not something you get used to very easily, I know that.” The Republican National Committee outraised its Democratic counterpart, $91 million to $84 million, last year. Four years ago, when the Republicans controlled the White House and both houses of Congress, the party took in $105 million to the Democrats’ $56 million. The House Democrats’ fundraising committee took in $55.6 million, while House Republicans raised $36.2 million. The Democratic Senatorial Campaign Committee raised $43.6 million, to $41.2 million for the National Republican Senatorial Committee. “It’s not terribly surprising they have leads in the money sprint,” Republican consultant Alex Vogel said. “My guess is you will have enough parity that you’re not going to have money making the difference at the end of the day.” Democratic Difficulties Van Hollen, speaking on “Fox News Sunday” today, acknowledged that 2010 was “going to be a difficult election year, the first midterm for a new president.” The House Democrats’ fundraising was helped by $641,950 raised by former Texas Lieutenant Governor Ben Barnes, now a lobbyist, who hosted an event in Austin last fall. He brought in more than any other lobbyist fundraiser for House Democrats, FEC records show. Barnes’s lobbying issues included physician-owned hospitals. In August 2008, Medicare began requiring doctors who own a financial stake in hospitals to tell patients being referred there about any financial links. “This wasn’t about lobbying; this was about Democrats,” Barnes said in an interview. “I was a Democratic giver and fundraiser long before I registered to represent anybody.” To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net ; John McCormick in Honolulu at jmccormick16@bloomberg.net .

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Stocks in U.S. Advance as Economic Growth Data, Earnings Exceed Estimates

January 29, 2010

By Nikolaj Gammeltoft and Elizabeth Stanton Jan. 29 (Bloomberg) — U.S. stocks swung between gains and losses as disappointing results at technology companies offset a government report showing the economy grew last quarter at the fastest pace in six years. Microsoft Corp. led technology shares to the biggest drop among 10 groups as Chief Financial Officer Peter Klein said the company has yet to see a recovery in spending on enterprise software. SanDisk Corp., the biggest maker of flash-memory cards, slid 10 percent after its sales forecast fell short of some estimates. Amazon.com Inc. rose after predicting faster sales growth, while Wal-Mart Stores Inc. gained as Goldman Sachs Group Inc. advised buying the shares. The S&P 500 added less than 0.1 percent to 1,085.2 at 12:30 p.m. in New York. The Dow Jones Industrial Average rose 27.43 points, or 0.3 percent, to 10,147.89. The Nasdaq Composite slipped 0.3 percent to 2,173.18. “This is a sector where competition is fierce,” Leo Grohowski , who oversees $154 billion as the New York-based chief investment officer at BNY Mellon Wealth Management, said of technology companies. “We’re looking for stabilization of pricing power as the economy has improved, and not only is pricing not stabilizing, it’s still deteriorating. Investors don’t see visibility of earnings power driven by pricing pressure.” January Retreat U.S. shares retreated yesterday, sending the S&P 500 to an almost three-month low, after Qualcomm Inc. lowered its sales forecast and speculation mounted Greece won’t be able to finance its budget deficit. The S&P 500 , poised for its third straight weekly drop, has tumbled 5.7 percent from a 15-month high on Jan. 19 after President Barack Obama called for limits on risk- taking by banks and China moved to restrict lending and cool economic growth. The index is down 2.7 percent year-to-date, poised for its first monthly decline since October and the biggest since it plunged 11 percent in February 2009. The performance of the S&P 500 in January is a reliable predictor of how it will perform during the year, according to the Stock Trader’s Almanac. Before last year, when the index dropped 8.6 percent in January and rose 23 percent for the year, the so-called January barometer registered only five major errors since 1950, according to the almanac. Chicago Purchasing Managers Stocks extended gains earlier after the Institute for Supply Management-Chicago Inc. said its business barometer climbed to 61.5 from 58.7 in December. The median forecast was for a drop to 57.2. The U.S. economy is recovering from its longest recession since the Great Depression, caused by bank losses stemming from the collapse of the subprime mortgage market. Corporate profits are estimated to have increased in the fourth quarter from the year-earlier period for the first time since the second quarter of 2007, ending a record nine-quarter earnings slump. SanDisk, the biggest maker of flash-memory cards for digital cameras and mobile phones, fell 10 percent to $25.79. The company anticipates sales of $875 million to $950 million in the first quarter, Chief Financial Officer Judy Bruner said yesterday on a conference call with analysts. The average estimate in a Bloomberg survey is $931 million. S&P 500 companies that have released results posted an estimated combined profit of $16.83 a share, according to Bloomberg data. That compares with a loss of 9 cents a share in the year-ago quarter, according to S&P. Of the 196 companies in the S&P 500 that have reported earnings since Jan. 11, 156 have beaten analysts’ estimates, according to Bloomberg data. ‘Negative Nabobs’ “The negative nabobs are just wrong,” said William Smead , chief executive officer of Smead Capital Management in Seattle, which oversees $170 million. “These companies are all so lean that as the economy surprises to the upside, the earnings power is going to be incredible.” Amazon.com rose 2.4 percent to $129.11 in New York. The world’s biggest online retailer forecast first-quarter sales that beat some analysts’ estimates and said it will buy back as much as $2 billion of its shares. Wal-Mart gained 2.3 percent to $53.81. The shares were raised to “buy” from “neutral” at Goldman Sachs, which forecast earnings at the U.S. retailer will increase on the back of cost-cutting and profit margin growth, while the valuation of the shares is “compelling.” To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net Elizabeth Stanton in New York at estanton@bloomberg.net

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Housing `On Life Support’ as Foreclosures, Unemployment Thwart Obama Plans

January 29, 2010

By Kathleen Howley Jan. 29 (Bloomberg) — President Barack Obama’s efforts to bolster the U.S. housing market, the trigger of the worst recession since the 1930s, may be undone by record unemployment and repossessions by lenders. Foreclosures probably will reach 3 million this year, surpassing the record of 2.82 million in 2009, according to Irvine, California-based RealtyTrac Inc. That would more than offset an estimated 448,000-unit rise in home sales, based on the average forecast of the National Association of Realtors, the Mortgage Bankers Association and Fannie Mae. The housing industry remains a challenge for Obama as he enters his second year of office and government assistance programs near expiration. Data this week showed home sales tumbled after the expected end of an $8,000 tax credit for first-time buyers boosted transactions the prior month. “The housing market is still on life support, and if government measures are withdrawn too quickly it could sink it, taking the economy down with it,” said Mark Zandi , chief economist at Moody’s Economy.com in West Chester, Pennsylvania. “Households have such high debt loads, in addition to their mortgages, that any reduction in income, including a job loss, could trigger a foreclosure.” Employers have cut more than 7 million jobs in the last two years, the biggest employment loss since the Great Depression. The U.S. jobless rate probably will average 10 percent in 2010, according to the median estimate of 59 economists surveyed by Bloomberg. That would be the highest yearly rate in government records dating to 1948. Unemployment was 9.3 percent in 2009, the most in 26 years. Mortgage Modifications The Obama administration’s primary anti-foreclosure plan , the Home Affordable Modification Program, or HAMP, resulted in 66,465 permanent modifications by the end of December, compared with goal of up to 4 million by 2012. In total, 1.16 million offers were extended to borrowers and the terms of about 900,000 mortgages were changed on either a trial or permanent basis, the Treasury Department said in a Jan. 15 report. “We’re working to lift the value of a family’s single largest investment — their home,” Obama said in his Jan. 27 State of the Union speech to Congress. For HAMP to succeed, the program will have to be changed to include principal reductions on mortgages to offset value declines, according to Karen Weaver , global head of securitization research at Deutsche Bank AG in New York, and Laurie Goodman , the New York-based senior managing director at Amherst Securities Group. Principal Reductions In its current version, HAMP lowers mortgage payments to about a third of borrowers’ income by reducing interest, lengthening repayment terms and deferring principal repayments. “If the other measures in HAMP aren’t working, the government will have to look at principal reductions,” said Brian Bethune , chief financial economist at IHS Global Insight in Lexington, Massachusetts. In addition to modifications, the government’s Making Home Affordable program was responsible for refinancing 3.8 million loans in the portfolios of government-run Fannie Mae and Freddie Mac. The program, known among mortgage brokers as Obama refis, allows borrows who have balances higher than their home’s value to renew their loans at lower rates. One in Four One in four U.S. homeowners holds a mortgage with a balance higher than the property’s value. The number of borrowers with so-called negative equity reached 10.7 million, or 23 percent, at the end of the third quarter, according to a Nov. 24 report by First American CoreLogic, a Santa Ana, California-based real estate research firm. Government programs to help underwater borrowers exclude jumbo mortgages that aren’t eligible to be purchased by Washington-based Fannie Mae and Freddie Mac of McLean, Virginia. The government spent $230 billion to support HAMP and other housing programs in the 12 months ended Sept. 30, according to the Congressional Budget Office in Washington. The Federal Reserve has pledged to spend $1.25 trillion buying mortgage- backed securities in an effort to reduce fixed-mortgage rates. That program is set to end this quarter. The 30-year mortgage rate dropped to an all-time low of 4.71 percent during the first week of December, according to Freddie Mac. It was at 4.98 percent in the week ended yesterday. The Federal Reserve said Jan. 27 it will keep the target rate for overnight bank lending near zero to help nurture the recovery. “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,” the Federal Open Market Committee said this week in a statement. Dropped Reference The statement dropped the previous reference to real estate that said housing “has shown some signs of improvement.” National home prices rose 1.5 percent last month from a year earlier, the first annual gain since August 2007, the Chicago-based National Association of Realtors said Jan. 25. The median price fell 12 percent in 2009 to $173,500, compared with a 9.5 percent drop in 2008, NAR data show. While the tax credit spurred a 4.9 percent rise in home resales last year, the first annual gain since 2005, sales of existing homes in December slumped 17 percent, the biggest drop on record. The tax benefit originally scheduled to expire Nov. 30 was extended into 2010 and expanded to all buyers by a bill Obama signed on Nov. 6. The extension gives buyers until April 30 to have a signed contract on a home, and until July 1 to close on it. New-Home Sales Purchases of new homes fell 7.6 percent to an annual pace of 342,000 in December, the fourth drop in the past five months, the Commerce Department said Jan. 27 in Washington. Sales declined 23 percent to 374,000 in 2009, the lowest level since records began in 1963. The median price of a new house fell 3.6 percent from the year-earlier month to $221,300, the agency said. Currently, 6.5 million households are either in default or at least one payment behind on their mortgages, according to the Center for Responsible Lending based in Durham, North Carolina. If enough of those are seized by lenders, it could lead to a “double-dip recession or at least to a slower recovery,” said Julia Gordon , senior public policy counsel for the research and policy group, in testimony before the House of Representatives Committee on Financial Services last month. “Housing is going to have a bumpy ride this year because of foreclosures,” said Bethune, of IHS Global Insight. To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net .

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Economy in U.S. Expanded at a 5.7% Annual Pace, Biggest Gain in Six Years

January 29, 2010

By Timothy R. Homan Jan. 29 (Bloomberg) — The economy in the U.S. expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines and companies increased investment in equipment and software. The 5.7 percent increase in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, figures from the Commerce Department showed today in Washington. Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades. Manufacturers such as Intel Corp. may keep leading the recovery as increasing sales prompt companies to restock. A slowdown in consumer spending last quarter is a reminder that 10 percent unemployment is causing Americans to hold back, one reason why the Federal Reserve is keeping interest rates low and the Obama administration is proposing new plans to create jobs. “The economy is still healing and improving,” said John Silvia , chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected a 5.6 percent gain in GDP. “I think this is a sustainable recovery.” Stocks rose after the report. The Standard & Poor’s 500 Index climbed 1 percent to 1,094.90 at 10:23 a.m. in New York. Treasuries dropped, pushing the yield on the benchmark 10-year note up to 3.68 percent from 3.64 percent late yesterday. Confidence Rising Private reports released today showed confidence among U.S. consumers improved in January for a second month, and companies expanded this month at the fastest pace in more than four years as orders and employment increased. The economy was forecast to grow at a 4.7 percent annual pace, according to the median estimate of 84 economists in a Bloomberg News survey. Estimates ranged from gains of 3 percent to 7.5 percent. For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946. Consumer spending, which comprises about 70 percent of the economy, rose at a 2 percent pace, more than anticipated following a 2.8 percent increase in the previous three months. Economists projected a 1.8 percent gain, according to the survey median. Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August. Households Household purchases dropped 0.6 percent last year, the biggest decrease since 1974. Increases in production last quarter stemmed the slide in inventories. Stockpiles dropped at a $33.5 billion annual pace following a $139.2 billion decline the previous three months. Inventories declined at a record $160.2 billion pace in the second quarter. Today’s report showed purchases of equipment and software increased at a 13 percent pace in the fourth quarter, the most since 2006. The gain helped offset a 15 percent drop in commercial construction, leaving total business investment up 2.9 percent over the past three months. Intel, the world’s largest chipmaker, posted its biggest quarterly revenue in more than a year last quarter, a sign the computer industry has emerged from last year’s global recession. ‘Robust’ Growth “My expectation for 2010 is that we’re going to see robust unit growth,” Chief Financial Officer Stacy Smith said in an interview this month. “The consumer segments of the market will stay pretty strong, and I do believe we’re going to see a resurgence in PC client sales.” A report yesterday showed companies ordered more capital goods such as machinery and computers in December, indicating business investment will keep expanding. The job market is one area where a rebound is still not evident. Payrolls fell by 85,000 last month after a 4,000 gain in November that was the first increase in almost two years. The U.S. has lost 7.2 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era. The jobless rate held at 10 percent in December, the Labor Department said on Jan. 8. A jump in the number of discouraged workers leaving the labor market kept the rate from rising. President Barack Obama this week said job creation will be the “number one focus in 2010.” Speaking during his first State of the Union address, Obama called on Congress to deliver a new jobs bill to his desk. Fed’s Policy Fed policy makers, after their meeting this week, said the recovery is gaining strength and business investment “appears to be picking up.” They also repeated a pledge to keep the benchmark interest rate low for an “extended period.” The central bankers held the overnight lending rate between banks in the range near zero, where it has been for more than a year. In other areas of the economy, today’s report showed a smaller trade gap contributed 0.5 percentage point to fourth- quarter growth, while government spending was little changed, dropping at a 0.2 percent pace. Residential construction climbed at a 5.7 percent rate last quarter after expanding at a 19 percent pace in the previous three months. Inflation held below the Fed’s long-term forecast. The central bank’s preferred price gauge, which is tied to consumer spending and strips out food and energy costs, rose at a 1.4 percent annual pace following a 1.2 percent increase in the prior quarter. The GDP price gauge climbed at a 0.6 percent pace, less than the 1.3 percent median forecast of economists surveyed. Today’s GDP report is the first for the quarter and will be revised in February and March as more information becomes available. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Microsoft Profit Beats Estimates on Release of Windows 7 Operating System

January 28, 2010

By Dina Bass Jan. 28 (Bloomberg) — Microsoft Corp. , the world’s largest software maker, reported second-quarter profit that topped analysts’ estimates after Windows 7 spurred the first sales increase in a year. Second-quarter net income rose 60 percent to $6.66 billion, or 74 cents a share, beating the 59-cent average estimate of analysts surveyed by Bloomberg. Revenue climbed 14 percent to $19 billion, the company said today in a statement. Personal-computer buyers stepped up orders last quarter as the economy recovered and Microsoft released a new version of Windows. Sales of U.S. PCs running Windows rose about 50 percent over the holiday season, the company said earlier this month, citing data from NPD Group Inc. Microsoft is counting on Windows 7 to trigger a surge of upgrades by consumers and businesses. “Microsoft is in a great position,” sent Brent Thill , an analyst at UBS AG in San Francisco, who recommends buying the shares. “They have one of the best product cycles in the last five years, maybe 10, and it spans across their three biggest divisions.” Microsoft , based in Redmond, Washington, fell 51 cents to $29.16 at 4 p.m. New York time on the Nasdaq Stock Market. The stock climbed 19 percent last quarter, exceeding the 5.5 percent gain by the Standard and Poor’s 500 Index . Today’s earnings report is the first under Chief Financial Officer Peter Klein , who was named to the post in November. Second-quarter sales included $1.71 billion in deferred revenue from previous quarters. Analysts projected total sales of $17.9 billion for the period, which ended Dec. 31. A year earlier, net income was $4.17 billion, or 47 cents a share, on sales of $16.6 billion. No Forecast Microsoft, which stopped giving earnings forecasts in January 2009, didn’t give a specific outlook for profit and sales. Microsoft reiterated an October prediction that it will spend as much as $26.5 billion on operating expenses this fiscal year. PC shipments rose 15 percent worldwide last quarter, according to Framingham, Massachusetts-based IDC, which had predicted 11 percent growth. U.S. shipments were even more surprising. They jumped 24 percent, four times the rate that IDC had projected. Microsoft ’s Windows runs more than 90 percent of the world’s PCs. Many customers skipped the last version of the software, called Vista, raising speculation that buyers will upgrade this time around. Microsoft ’s Bing search engine, released in June, has increased its market share by 2.7 percentage points, according to research firm ComScore Inc. Microsoft had 10.7 percent of the U.S. search market in December, compared with 65.7 percent for Google Inc. and 17.3 percent for Yahoo! Inc. , according to ComScore. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Obama: Send $30 Billion In Big Bank Bailout Money To Community Lenders For Small Business

January 28, 2010

President Obama devoted the biggest portion of his first State of the Union address on Wednesday night to various aspects of job creation. While I appreciate Obama’s aspirational and inspirational speeches — in Cairo on Islamic relations and in Oslo on waging war, to name two standouts — I welcome some nitty-gritty coming from the president.

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British sky Broadcasting released its earnings for the first half

January 28, 2010

British sky Broadcasting released its earnings for the first half

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GE, Komatsu complete delivery of the first AC mining trucks in India

January 28, 2010

GE, Komatsu complete delivery of the first AC mining trucks in India

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Stocks, U.S. Futures, Climb on Profit, Fed Outlook for Economy; Yen Falls

January 28, 2010

By Rocky Swift and Saeromi Shin Jan. 28 (Bloomberg) — Asian stocks snapped their longest losing streak since 2004, U.S. index futures climbed and the dollar strengthened after Federal Reserve policy makers said America’s economy is in a recovery, while Canon Inc. said its profits will rise the most in a decade. The MSCI Asia Pacific Index rose 0.7 percent to 118.89 at 5:05 p.m. in Tokyo, the first gain in nine days, and Standard & Poor’s 500 Index futures climbed 0.6 percent, with gains accelerating after U.S. President Barack Obama said in his State of the Union address that “the worst of the storm has passed.” The Dow Jones Stoxx 600 futures jumped 1.3 percent to 250.55. The dollar advanced to a six-month high against the euro. Copper fell as much as 2.6 percent, leading declines in industrial metals, on concerns that China will take steps to cool demand. “Uncertainties that overwhelmed markets in the past few days such as tightening concerns in China are subsiding,” said Chu Moon Sung , a fund manager at Shinhan BNP Paribas Asset Management Co., which manages $26 billion. “Investors are shifting their attention to the fact that the overall recovery trend of the economy remains intact and there may be upgrades in earnings estimates.” Asian stocks rallied as Canon rose 1.8 percent to 3,680 yen after saying late yesterday that net income will probably jump 52 percent this year. Honda added 3.3 percent to 3,140 yen after Nikkei English News reported that the car maker likely will post an operating profit of more than 300 billion yen ($3.3 billion) for the year to March, compared with its 190 billion yen forecast. Sony Climbs Sony jumped 4.9 percent to 3,085 yen on a Nikkei report that the company may show its first operating profit in five quarters. Japan’s Nikkei 225 Stock Average advanced 1.6 percent. Gains were limited by Toyota Motor Corp. , which fell 3.9 percent to 3,560 yen, its fifth-straight decline, after expanding auto recalls. The Hang Seng Index added 1.5 percent and Taiwan’s Taiex index climbed 1.8 percent. S&P futures rose, following the index’s 0.5 percent gain yesterday, after the Fed said that the U.S. economy is improving and reiterated its pledge to keep interest rates low “for an extended period.” Futures also climbed after Apple unveiled a $499 tablet computer, the Ipad, that costs half what some analysts estimated. Wintek Corp. , a Taiwanese maker of Apple’s flat-panel displays, rose 1.1 percent. The MSCI Asia Pacific Index sank 6.9 percent in the past eight days as Obama proposed measures to limit risk taking at banks and as concern grew China will rein in growth. The equity gauge is still 42 percent higher from a year ago. China Banks Banks in China, which has been powering the recovery in the world economy, were told by regulators to step up scrutiny of property loans to prevent asset bubbles. Bank of China Ltd. rose 3 percent and China Citic Bank Corp. jumped 3.8 percent in Hong Kong trading. The dollar strengthened to $1.4038 per euro from $1.4024 in New York yesterday, after climbing to $1.3938, the strongest since July 14. The greenback rose to 90.44 yen from 90 yen after the Fed upgraded its economic outlook. While policy makers said rates will remain low, after voting to leave the target rate for overnight loans between banks in a range of zero to 0.25 percent, Kansas City Fed President Thomas Hoenig said it’s time to change the promise. “With Hoenig sounding relatively hawkish, they are a bit more upbeat than people had expected,” said Danica Hampton , a senior strategist at Bank of New Zealand Ltd. in Wellington. “The U.S. dollar is going to find a bit more support. I think that will be further supported with the U.S. GDP data.” Economic Growth Obama used his first State of the Union address to call for an extension of tax incentives worth $38 billion over this year and next to spur growth. He said he wasn’t interested in “punishing banks,” though he derided Wall Street’s “big bonuses.” Economists in a Bloomberg survey forecast U.S. gross domestic product expanded 4.6 percent in the fourth quarter after gaining 2.2 percent in the third. The Commerce Department in Washington is set to release the data tomorrow. That would be the strongest since the first three months of 2006. Treasuries declined for a second day before U.S. reports that economists said will show durable goods orders rose in December and fewer Americans sought jobless benefits last week. Yields Rise “For the Fed to move, it depends on the labor market,” said Hideo Shimomura , who helps oversee the equivalent of $56 billion as chief fund investor in Tokyo at Mitsubishi UFJ Asset Management Co., a unit of the world’s biggest bank by assets. “With labor market improvement, people may start wondering about when the Fed will hike.” The yield on the benchmark 10-year note rose two basis points to 3.67 percent at 7:19 a.m. in London, according to BGCantor Market Data. The rate touched 3.69 percent, the highest since Jan. 20. The 3.375 percent security due November 2019 fell 5/32, or $1.56 per $1,000 face amount, to 97 18/32. Oil traded near a five-week low after falling yesterday as a government report showed inventories of gasoline rose to a 22- month high in the U.S., the world’s biggest energy consumer. Crude for March delivery was at $74 a barrel in electronic trading on the New York Mercantile Exchange. Yesterday, the contract fell $1.04 to $73.67, the lowest close since Dec. 21. Copper for three-month delivery dropped 1.7 percent to $7,110.50 a metric ton on the London Metal Exchange, near a one- month low, as China, the world’s biggest metals consumer, takes steps to rein in lending to cool the economy. The metal has lost 5 percent in three days. Aluminum declined 1.3 percent to $2,152 a ton as the dollar gained for a third day against six major currencies. Gold was little changed at $1,089.15 an ounce. To contact the reporters for this story: Rocky Swift at in Tokyo or rswift5@bloomberg.net ; Saeromi Shin in Seoul at sshin15@bloomberg.net .

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Fed Keeps `Extended Period’ Rate Pledge

January 27, 2010

By Craig Torres Jan. 27 (Bloomberg) — The Federal Reserve kept interest rates near zero and restated its intention to cease buying mortgage-backed securities in March, while losing unanimity on how long to keep borrowing costs low. At the same time, “the Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” the Federal Open Market Committee said in a statement today in Washington. Policy makers are keeping interest rates “exceptionally low” for an “extended period” as they wind down the record amounts of credit they have provided since the bankruptcy of Lehman Brothers Holdings Inc. in 2008. Kansas City Fed President Thomas Hoenig dissented, saying “financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.” Stocks fell in the minutes after the decision was released before recovering. Ten-year Treasury notes declined and the dollar gained. The Fed also repeated that it will close four facilities supporting money markets and bond dealers in February, as well as dollar swap programs with central banks in Europe and Asia. The central bank is “prepared to modify these plans if necessary to support financial stability and economic growth,” the statement said. The Fed also said it is winding down the Term Auction Facility and will hold a final auction on March 8. Return to Growth Chairman Ben S. Bernanke, who tomorrow faces a procedural vote in the Senate on his confirmation for a second term, is looking for signs that the return to economic growth is generating jobs and is accompanied by an increase in credit to people and businesses. The U.S. unemployment rate held at 10 percent in December, while consumer credit dropped a record $17.5 billion in November. “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,” the Fed said in its statement. Businesses “remain reluctant to add to payrolls.” Verizon Communications Inc. , coping with subscriber losses at its fixed-line phone business, said yesterday it will cut about 13,000 jobs at the division this year. Home Depot Inc ., the world’s largest home-improvement retailer, also said yesterday it will pare 1,000 U.S. jobs. Consumer Wealth Stocks have provided no increase in consumer wealth this year. The Standard & Poor’s 500 Index is down more than 2 percent, and the Nasdaq Composite Index has lost more than 3 percent. Last year, the indexes rose 23.5 percent and 43.9 percent, respectively. Officials kept their benchmark overnight lending rate between banks in a range of zero to 0.25 percent, where it has been for more than a year. Policy makers said that low rates are contingent on “low rates of resource utilization, subdued inflation trends, and stable inflation expectations .” “Their forecast is for a subdued recovery and the data have been consistent with that,” Julia Coronado, senior economist at BNP Paribas SA in New York, said before the statement. “Retail sales edged lower in December, and credit is still contracting.” Factory Capacity Production in the U.S. rose for a sixth consecutive month in December, and housing markets are stabilizing. Industrial production rose 0.6 percent last month, pushing up factory capacity in use to 72 percent. That’s still below the average plant-use rate of 78.5 percent from 2000 through 2007. “You have sustainable growth, but far below the trend rate” needed to lower unemployment, John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before today’s Fed decision. “I don’t see how the Fed is going to start raising rates with the unemployment rate at 10 percent.” The economy expanded at a 4.6 percent annual rate in the final quarter of last year, according to the median estimate of economists surveyed by Bloomberg News. The government will release its advance report on gross domestic product Jan. 29. Home Sales Sales of existing homes rose 4.9 percent to 5.16 million in 2009, the first gain in four years, the National Association of Realtors said this week. Fed officials will be watching to see if the end of their mortgage bond purchase programs hinders a recovery in housing. The average rate on a 30-year fixed mortgage fell to 4.99 percent the week of Jan. 21 from 5.06 percent the previous week, according to Freddie Mac of McLean, Virginia. The 56-year-old Fed chairman’s first four-year term expires at the end of this month, and the Senate hasn’t yet confirmed the former Princeton University professor for a second four-year term. Bernanke has presided over two years of economic growth that were followed by a financial crisis that produced the worst recession since the Great Depression. The economy contracted at a 5.4 percent annual rate in the fourth quarter of 2008 and at a 6.4 percent rate in the first quarter of 2009. Labor-Market Weakness Employers cut 85,000 jobs in December, after revisions showed a gain of 4,000 in November, the first in almost two years. The unemployment rate held at 10 percent. Wal-Mart Stores Inc., the world’s largest retailer, will eliminate about 11,200 jobs at its Sam’s Club membership warehouse clubs in the U.S. as it hires an outside company to demonstrate products. Dallas-based financial services company Comerica Inc. said Jan. 21 that it plans to cut 300 jobs, or about 3 percent of its total workforce, this year. U.S. central bankers forecast in November a slow decline in unemployment this year with the jobless rate averaging 9.3 percent to 9.7 percent in the fourth quarter, according to their central tendency estimates. “We’ll definitely see job growth in 2010,” New York Federal Reserve Bank President William Dudley told the Nightly Business Report on PBS Television Jan. 13. “Whether it’ll be sufficient to bring down the unemployment rate, materially, remains to be seen.” To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net

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