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Dubai Property Market to Recover by the End of 2011, Dubai Pearl CEO Says

by on March 17, 2010

By Zainab Fattah March 17 (Bloomberg) — Dubai’s property market will recover by the end of 2011 as mortgages become easier to obtain and more people move to the city, according to the developer of a $4 billion hotel and residential project. “Banks can’t stay away for long,” Santhosh Joseph , 45, chief executive officer of Dubai Pearl , said in an interview. “They have to lend and, historically, most of this region’s lending goes into property.” Dubai, the second-biggest sheikhdom in the United Arab Emirates , experienced the world’s worst property slump during the global recession, with selling prices falling by more than 50 percent and project cancellations exceeding $300 billion. To sustain itself, Dubai Pearl is relying on $1.5 billion paid for apartments in advance and another $500 million that has been committed by Al Fahim Group, Joseph said. “We’re not expecting to sell substantially in 2010 and 2011,” said Joseph. “We are a zero-debt company but we may look into leveraging at a later date,” he said. Joseph has a 20 percent stake in Dubai Pearl while the rest is owned by a group of investors led by Al Fahim Group , one of Abu Dhabi’s wealthiest families. Artificial Beach Dubai Pearl is building four 73-story towers connected by a single roof less than a mile from the emirate’s palm-tree shaped man-made islands shaped like palm-trees. The project, which has the same name as the company, will have 20 million square foot (1.9 million square meters) of hotel and residential space. MGM Grand , SkyLofts, Bellagio, and Baccarat are among the six hotels that will have 1,400 rooms. The main structure will be surrounded by an artificial beach and low-rise buildings containing malls and theaters. The project is scheduled for completion 2013. The property crisis prompted Dubai Pearl to review the project and add entertainment and health components to the design, Joseph said. The company also renegotiated terms with buyers, such as longer payment schedules, to reduce the chance of defaults. “In 2010 and until the second half of 2011, I’m not expecting the international markets to be liquid or mortgages to be widely available,” he said. “Real-estate cycles are usually three years peak-to-peak and the best locations tend to bounce quickly.” Dubai Pearl is at the center of a newly developed part of the city, surrounded by populated areas such as Palm Jumeirah , Dubai Media City and Dubai Internet City where international media and technology companies are based. The densely populated Dubai Marina is also nearby. The project has the “best location with a captive clientele in a six-mile radius,” Joseph said. “Our area lacks communities where residents can walk from end to end.” The company is selling residential space at 2,250 dirhams ($613) a square foot, while furnished and serviced Baccarat- branded apartments are selling starting at $1,000 a square foot. The prices have been slashed by about 30 percent, he said. To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net .

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Dubai Property Market to Recover by the End of 2011, Dubai Pearl CEO Says

Europe Ahead: Inflation Creeps Down in the Euro Zone ahead of the EU Finance Ministers Second-Day Meeting

by on March 16, 2010

Europe Ahead: Inflation Creeps Down in the Euro Zone ahead of the EU Finance Ministers Second-Day Meeting

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Europe Ahead: Inflation Creeps Down in the Euro Zone ahead of the EU Finance Ministers Second-Day Meeting

Consumer confidence in Japan rose for the second straight month

March 15, 2010

Consumer confidence in Japan rose for the second straight month

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The final reading for the fourth quarter showed slow growth during the weakness of capital spending in the second biggest global economy.

March 11, 2010

The final reading for the fourth quarter showed slow growth during the weakness of capital spending in the second biggest global economy.

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Business confidence in Australia rose for the second straight month in February

March 9, 2010

Business confidence in Australia rose for the second straight month in February

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Yields on Tax-Exempt Bond Sales Reach Their Lowest Level in Three Months

March 5, 2010

By Catarina Saraiva March 5 (Bloomberg) — Yields on local and state government tax-exempt bonds fell to a three-month low as supply shrank to the smallest amount in four weeks. Yields on top-rated general obligations due in 10 years fell to 3 percent, the lowest since Dec. 10, a daily survey by Municipal Market Advisors shows. Tax-exempt sales totaled $3.6 billion this week, dropping to less than $4 billion for the first time since the five-day period ended Feb. 5. Issuers led by Georgia’s Municipal Electric Authority sold $2 billion in taxable Build America Bonds, which provide a 35 percent subsidy on interest costs from the federal government. The Georgia utility plans to sell an additional $920 million of such debt today. “There is a lot of interest out there in pure tax-exempt bonds,” said Anthony Shields , a principal in the public finance department at Williams Capital Group in New York. “Build America Bonds are sucking out some of the issuance, so that there’s less and less pure tax-exempts coming to market.” The New York Dormitory Authority , the second-biggest municipal issuer after California last year, sold $590.8 million secured by personal income tax revenue, including $365.7 million of tax-exempt debt. After getting more than $200 million in orders from individual buyers, the agency finished the pricing ahead of schedule, Shields said. Benchmark borrowing costs for state and local government selling 30-year revenue bonds fell to a seven-week low of 4.93 percent, according to the weekly Bond Buyer 25 index. Securities in the gauge have an average Moody’s Investors Service rating of A1, the fifth highest. “The demand component is going up just as the supply component is going down,” said Mike Pietronico , chief executive officer of Miller Tabak Asset Management in New York. “That has all the makings of a bull market. It’s like the perfect storm.” Following are descriptions of pending sales of municipal debt in the U.S. ASCENSION HEALTH, the largest nonprofit health-care system in the U.S., plans to sell about $1.35 billion in tax-exempt revenue bonds beginning next week. About $745 million will be used to refinance current debt and $600 million will help fund new construction and expansion at five health-care centers, said Stephen Gilmore, director of capital finance for St. Louis-based Ascension. Morgan Stanley will market a $670.5 million fixed- rate sale on March 10 and a $675.4 variable-rate issue later in the month. Ascension is rated Aa1 by Moody’s, AA by Standard & Poor’s and AA+ by Fitch Ratings. (Added March 5) MASSACHUSETTS , the second most-indebted state per capita after Connecticut, plans to sell $538.9 million of floating-rate general obligations as early as next week. The date of the sale will be determined by market conditions, according to the state treasurer’s Web site. Revenue from the sale will help refinance outstanding variable-rate demand bonds supported by an agreement from Citibank that expires later this month, according to Moody’s. Underwriters led by Morgan Stanley will market the issue. The state’s general obligations are rated Aa2 by Moody’s, while Fitch and S&P rate them AA, the third-highest of 10 investment grades. (Updated March 5) GUILFORD COUNTY , North Carolina, plans to sell $298.4 million of general obligations next week. The sale includes $82.5 million of tax-exempt debt and the same amount of taxable Build America Bonds to fund public improvements. The remainder, also tax exempt, will be used to refinance existing debt. The county, which includes Greensboro, has a top rating from S&P. Moody’s and Fitch grade it one level lower. (Updated March 5) CALIFORNIA , the lowest-rated U.S. state, intends to raise as much as $5 billion from investors this month with its first debt sales since November, according to Treasurer Bill Lockyer . JPMorgan Chase & Co. and Morgan Stanley were selected to manage a tax-exempt deal of as much as $2 billion on March 11, and Citigroup Inc. and Bank of America Merrill Lynch will handle a taxable offering later in the month, according to the state treasurer’s Web site. California is rated A- by S&P, Baa1 by Moody’s and BBB by Fitch. (Updated March 2) DETROIT, the largest U.S. city whose general obligation debt is rated below investment grade, plans to borrow $250 million as early as next week by issuing municipal securities to help fill a budget deficit, Moody’s said in a report. State aid derived from a Michigan-wide sales tax as well as the city’s full faith and credit secure the bonds, rated A1 by Moody’s and AA- by S&P. Without aid from Michigan, the ratings would be B1 from Moody’s and BB by S&P. (Updated March 2) NEW YORK CITY MUNICIPAL WATER FINANCE AUTHORITY, which helps raise capital funding for a system that serves 9 million people, plans to sell $400 million in fixed-rate taxable Build America Bonds on March 9, the second such deal in less than two months. Proceeds from the sale will be used for capital improvements of the city’s water and sewer system, city finance officials said in a statement last week. The securities are rated AA+ by S&P, Aa3 by Moody’s and AA by Fitch. A group of underwriters led by Jefferies Group Inc. will market the securities to investors. (Added March 2) ILLINOIS, the second-lowest-rated U.S. state after California, will take bids on March 11 from banks seeking to underwrite $300 million of Build America Bonds and $56 million of non-subsidized taxable notes. The deal will finance school construction, according to John Sinsheimer , director of capital markets for Illinois. The state, which last sold BABs in a $1 billion deal on Jan. 28, is rated A2 by Moody’s, A+ by S&P and A by Fitch. A statutory requirement calls for 25 percent of all state debt to be bid competitively, Sinsheimer said. Banks led by William Blair & Co. will negotiate the sale of an additional $700 million in Build America securities in mid-March, he said. (Added March 2) DISTRICT OF COLUMBIA, the U.S. capital, plans to sell $715 million of tax-exempts backed by income tax revenue as soon as next week. The deal will replace a mixture of fixed- and variable-rate general obligation bonds, which have lower ratings, and reduce the district’s amount of adjustable-rate debt, Fitch said in a release March 3. Underwriters led by Goldman Sachs Group Inc. will handle the deal. The debt is rated AAA by S&P, AA by Fitch and Aa2 by Moody’s. (Updated March 4) To contact the reporter on this story: Catarina Saraiva in New York at asaraiva@bloomberg.net .

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China Plans to Cut Infrastructure Spending as Wen Aims to Spur Consumption

March 4, 2010

By Bloomberg News March 5 (Bloomberg) — China pledged to pare spending on roads, railways and airports and boost outlays on health and social security as Premier Wen Jiabao seeks to raise the role of consumer spending in the world’s third-largest economy. “The domestic economy still faces some prominent problems,” Wen, 67, said in the text of a speech to the National People’s Congress, similar to the U.S. State of the Union address. He cited a surge in property prices, one result of the record fiscal stimulus and credit expansion from last year that was designed to counter the impact of the global recession. Today’s pledges include raising health and social security outlays by more than 8 percent and expanding pensions, efforts that may help boost consumer spending and ease a reliance on exports that tumbled last year. At the same time, Wen indicated no roll-back in the fiscal stimulus that spurred a rebound: the government targeted a deeper budget deficit for 2010. “Wen needs policy consistency to sustain the economic recovery, create enough jobs and maintain social stability,” Shen Minggao , chief economist for greater China at Citigroup Inc. in Hong Kong, said before today’s report. After budgeting for a record 950 billion yuan fiscal deficit in 2009, Wen today pledged a 1.05 trillion yuan shortfall this year to fund the second year of a 4 trillion yuan stimulus package. Spending on transportation will fall 2.7 percent, the government said. Growth Accelerated China’s growth accelerated to 10.7 percent, the fastest pace since 2007, in the fourth quarter of last year, partly because of record bank lending. “Last year’s meeting was all about policies to boost growth,” Tim Condon , a Singapore-based chief Asia economist at ING Groep NV, wrote before today’s meeting of lawmakers. “This year’s will be about adjusting policies to deal with some of the side effects of the policies put in place last year.” The government needs to tackle “the fastest money supply growth since the over-heating, hard-landing period” of the early 1990s, Condon said. The property market will probably weaken because the government has signaled that it wants prices to fall, billionaire Zong Qinghou , the chairman of Hangzhou Wahaha Group Co. , said March 3. China may struggle to fix economic imbalances because key leaders are nearing the end of their tenures and vested interests can block measures such as a property tax that could help to wean local governments from dependence on land sales and taxes on industrial production . ‘Election Mode’ “China’s in severe election mode,” said Jim McGregor , a senior counselor in Beijing at APCO Worldwide, a public-affairs group advising clients including China Cosco Holdings Co. , Asia’s biggest shipping company. “They have 2 1/2 years left in their term,” he said before the meeting. There is “a lot of jockeying for position.” Wen has said China’s growth model is unbalanced and unsustainable. In last year’s work report, the premier said that the nation faced “unprecedented difficulties and challenges” and he pledged to “significantly increase” spending to reverse an economic slide. In contrast, this year the central bank has twice raised lenders’ reserve requirements to cool the economy. Still, policy makers have left interest rates unchanged and also maintained the yuan’s effective peg to the dollar, which has kept the currency at about 6.83 since July 2008, aiding exporters as global demand remains weak. The Shanghai Composite Index has fallen about 13 percent from last year’s August high on concern that monetary tightening will slow growth and cut profits. After last year overtaking the U.S. as the biggest auto market and Germany as the largest exporter, China is poised to surpass Japan this year as the second-largest economy. The nation will contribute more than a third of global growth in 2010, according to Nomura Holdings Inc. — Li Yanping . Editors: Paul Panckhurst , Chris Anstey 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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Stocks in U.S. Advance as Business Gauge, Economic Expansion Top Estimates

February 26, 2010

By Elizabeth Stanton Feb. 26 (Bloomberg) — U.S. stocks advanced, trimming the weekly drop in the Standard & Poor’s 500 Index, as reports showing business activity expanded and gross domestic product topped estimates overshadowed American International Group Inc. ’s plunge and home sales that missed projections. JPMorgan Chase & Co. led bank stocks to the biggest advance among 10 industries groups in the S&P 500 after Barclays Plc recommended buying the shares. Merck & Co. and UnitedHealth Group Inc. rose at least 0.8 percent, leading gains in health- care companies. AIG, the insurer bailed out by the U.S. government, slumped 10 percent after reporting an $8.87 billion fourth-quarter loss. The S&P 500 rose 0.1 percent to 1,104.49 at 4 p.m. in New York. It dropped 0.4 percent this week and gained 2.9 percent in February. The Dow Jones Industrial Average gained 4.23 points today, or less than 0.1 percent, to 10,325.26. Trading volume on U.S. exchanges was 7.89 billion shares, 11 percent less than the 2010 average, amid a storm that dumped about 21 inches (53 centimeters) of snow in New York City. “It’s a very brittle recovery,” said Matthew Kaufler , a money manager at Federated Clover Investment Advisors in Rochester, New York, which manages $2.8 billion. “Any sort of sustained growth in consumer spending is a ways off.” A decline in the Conference Board’s consumer confidence index to a 10-month low on Feb. 23 sent the S&P 500 to its biggest drop in more than two weeks. The University of Michigan today revised its gauge of consumer sentiment to 73.6 for February, from a preliminary reading of 73.9. Business Barometer The U.S. economy expanded at a 5.9 percent annual rate in the fourth quarter, more than the government reported last month, reflecting stronger business investment and a greater contribution from inventories. The Institute for Supply Management-Chicago Inc. said its business barometer climbed to 62.6 from 61.5 last month, a bigger increase than economists forecast and the highest since 2005. Sales of previously owned U.S. homes unexpectedly declined in January for a second month, eroding investor confidence in the sustainability of the recovery. Purchases fell 7.2 percent, the second-largest decline ever, to an annual pace of 5.05 million, the National Association of Realtors said. “At some point we have to turn consumer confidence around, and for that we need fundamental improvement in jobs and real estate, which are central to the problem,” said Eric Teal , who oversees $4.5 billion as chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina. There is a “disconnect between the psychology of the market and the fundamentals of the market.” ‘Buying Opportunity’ JPMorgan rose 3.3 percent to $41.97 for the biggest gain in the Dow average. The second-largest U.S. bank by assets offers an “attractive buying opportunity” as the stock traded at about 6 to 7 times normalized earnings, compared with a multiple of 9 for its peers, Barclays said. Merck , the second-largest U.S. drugmaker, rose 0.9 percent to $36.88. UnitedHealth Group , the biggest U.S. health insurer by revenue, gained 1.2 percent to $33.86. President Barack Obama is seeking the biggest U.S. health-care overhaul in 45 years. Congressional Republicans oppose the plan, which would require Americans to get insurance, with new purchasing exchanges and government aid to help. Obama and Democratic leaders said a bipartisan agreement was unlikely yesterday in Washington. “Health care is doing well based upon the growing realization that what ultimately gets passed isn’t going to be nearly as onerous as had been feared,” Kaufler said. Biggest Loss Ever AIG fell 10 percent to $24.77 for the biggest loss in the S&P 500. The fourth-quarter net loss of $8.87 billion, or $65.51 a share, narrowed from $61.7 billion, or $458.99, a year earlier when AIG recorded the biggest loss in U.S. corporate history. The loss was wider than expected as the company set aside more reserves for insurance claims and paying down bailout debts. Fluor Corp., the largest publicly traded U.S. construction company, dropped 5 percent to $42.80. The company lowered its 2010 earnings forecast to $2.80 to $3.20, from an earlier forecast of $3.20 to $3.60. Gap Inc., the operator of the Old Navy and Banana Republic clothing chains, rose 5.4 percent to $21.50. Gap forecast full- year profit of $1.70 to $1.75 a share. Analysts surveyed by Bloomberg estimated $1.69 on average. Gap also said it plans to increase its annual dividend to 40 cents a share from 34 cents and will buy back an additional $1 billion in stock. Profit Data The combined per-share earnings for the S&P 500 are $17.53 based on fourth-quarter reports by 453 companies, according to Bloomberg data, compared with a loss of 9 cents a share in the year-earlier period, according to S&P. Per-share profit declined in each of the past nine quarters, a record slump. Earnings topped analysts’ average estimates at three-quarters of the 456 companies in the S&P 500 that have posted quarterly results since Jan. 11, according to Bloomberg data. Interpublic Group of Cos. had the biggest gain in the S&P 500, surging 11 percent to $7.50. The owner of advertising firms reported fourth-quarter revenue of $1.8 billion, beating the average analyst estimate in a Bloomberg survey by 3.5 percent. BancorpSouth Inc. slumped 14 percent, the most since December 2008, to $19.47. The holding company for BancorpSouth Bank said it will delay filing its 2009 financial results because it’s reviewing its asset quality. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .

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U.S. Economy Expanded at 5.9% Pace in Fourth Quarter on Business Spending

February 26, 2010

By Timothy R. Homan Feb. 26 (Bloomberg) — The U.S. economy expanded at a 5.9 percent annual rate in the fourth quarter, more than the government reported last month, reflecting stronger business investment and a greater contribution from inventories. The rise in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance in more than six years, the Commerce Department said today in Washington. Inventories added 3.88 percentage points to GDP, more than previously reported, and investment in software and equipment grew at the fastest pace in almost a decade. Manufacturers such as Deere & Co. may continue to lead the recovery as increasing sales prompt companies to boost purchases and add to stockpiles. At the same time, consumer spending, which accounts for 70 percent of the economy, is likely to be restrained by an unemployment rate that’s forecast to average 9.8 percent this year. “There’s still room for inventories to add to growth,” said James O’Sullivan , global chief economist at MF Global Ltd. in New York, who accurately forecast the rise in GDP. “Going forward, the question comes back to sustainability, and the key to that is a clear pickup in the labor market, which I think is coming.” Stock-index futures swung between gains and declines after American International Group Inc.’s bigger-than-forecast quarterly loss overshadowed the GDP report. Standard & Poor’s 500 Index futures expiring in March rose less than 0.1 percent to 1,103.30 at 9:14 a.m. in New York after rising as much as 0.4 percent. Economists’ Estimates The economy was forecast to grow at a 5.7 percent annual pace, the same rate the government initially reported in January, according to the median estimate of 76 economists in a Bloomberg News survey. Estimates ranged from gains of 4.2 percent to 6.3 percent. For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946. The GDP report is the second for the fourth quarter and will be revised in March as more information, such as corporate profits, becomes available to the government. Consumer spending rose at a 1.7 percent pace, compared with the 2 percent rate forecast by economists and a 2.8 percent gain in the prior quarter. Spending added 1.23 percentage points to GDP. 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. Household Purchases Household purchases dropped 0.6 percent last year, the biggest decrease since 1974. Increases in production last quarter stemmed the slide in inventories from earlier in the year. Stockpiles dropped at a $16.9 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 an 18.2 percent pace in the fourth quarter, the most since 2000. The gain helped offset a 13.9 percent drop in commercial construction, leaving total business investment up 6.2 percent during the final three months of 2009. A report yesterday showed companies ordered more capital goods in January, driven primarily by bookings for commercial aircraft. Declines in other, less volatile industries indicate business investment may be slowing, according to yesterday’s Commerce Department figures. Job Market The job market is one part of the economy where a recovery is slow to take hold. Payrolls fell by 20,000 last month after a 150,000 drop in December. The U.S. has lost 8.4 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 fell to 9.7 percent in January, the Labor Department said on Feb. 5. Unemployment is projected to end the year at 9.5 percent, according to a Bloomberg survey. In other areas of the economy, today’s report showed a smaller trade deficit, which contributed 0.3 percentage point to fourth-quarter growth. Government spending fell at a 1.2 percent pace after a 2.6 percent increase the previous quarter. Residential construction climbed at a 5 percent rate last quarter after expanding at a 18.9 percent pace in the previous three months. Deere, the world’s largest maker of farm machinery, posted first-quarter profit this month that topped analysts’ estimates and raised its 2010 forecast. Chief Executive Officer Samuel Allen said Feb. 17 that full-year equipment revenue will increase as much as 8 percent. ‘Great Potential’ “Positive developments based on the world’s prospects for population and economic growth hold great potential and should help our company,” he said in a statement. Inflation stayed within the Fed’s long-term forecast range, today’s report showed. The central bank’s preferred price gauge, which is tied to consumer spending and strips out food and energy costs, rose at a 1.6 percent annual pace following a 1.2 percent increase in the prior quarter. The GDP price gauge climbed at a 0.4 percent pace, less than the 0.6 percent median forecast of economists surveyed. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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U.S. Economy Grew at 5.9% Pace in Fourth Quarter, More Than First Reported

February 26, 2010

By Timothy R. Homan Feb. 26 (Bloomberg) — The U.S. economy expanded at a 5.9 percent annual rate in the fourth quarter, more than the government reported last month, reflecting stronger business investment and a greater contribution from inventories. The rise in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance in more than six years, the Commerce Department said today in Washington. Inventories added 3.88 percentage points to GDP, more than previously reported, and investment in software and equipment grew at the fastest pace in almost a decade. Manufacturers such as Deere & Co. may continue to lead the recovery as increasing sales prompt companies to boost purchases and add to stockpiles. At the same time, consumer spending, which accounts for 70 percent of the economy, is likely to be restrained by an unemployment rate that’s forecast to average 9.8 percent this year. “There’s still room for inventories to add to growth,” said James O’Sullivan , global chief economist at MF Global Ltd. in New York, who accurately forecast the rise in GDP. “Going forward, the question comes back to sustainability, and the key to that is a clear pickup in the labor market, which I think is coming.” Stock-index futures swung between gains and declines after American International Group Inc.’s bigger-than-forecast quarterly loss overshadowed the GDP report. Standard & Poor’s 500 Index futures expiring in March rose less than 0.1 percent to 1,103.30 at 9:14 a.m. in New York after rising as much as 0.4 percent. Economists’ Estimates The economy was forecast to grow at a 5.7 percent annual pace, the same rate the government initially reported in January, according to the median estimate of 76 economists in a Bloomberg News survey. Estimates ranged from gains of 4.2 percent to 6.3 percent. For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946. The GDP report is the second for the fourth quarter and will be revised in March as more information, such as corporate profits, becomes available to the government. Consumer spending rose at a 1.7 percent pace, compared with the 2 percent rate forecast by economists and a 2.8 percent gain in the prior quarter. Spending added 1.23 percentage points to GDP. 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. Household Purchases Household purchases dropped 0.6 percent last year, the biggest decrease since 1974. Increases in production last quarter stemmed the slide in inventories from earlier in the year. Stockpiles dropped at a $16.9 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 an 18.2 percent pace in the fourth quarter, the most since 2000. The gain helped offset a 13.9 percent drop in commercial construction, leaving total business investment up 6.2 percent during the final three months of 2009. A report yesterday showed companies ordered more capital goods in January, driven primarily by bookings for commercial aircraft. Declines in other, less volatile industries indicate business investment may be slowing, according to yesterday’s Commerce Department figures. Job Market The job market is one part of the economy where a recovery is slow to take hold. Payrolls fell by 20,000 last month after a 150,000 drop in December. The U.S. has lost 8.4 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 fell to 9.7 percent in January, the Labor Department said on Feb. 5. Unemployment is projected to end the year at 9.5 percent, according to a Bloomberg survey. In other areas of the economy, today’s report showed a smaller trade deficit, which contributed 0.3 percentage point to fourth-quarter growth. Government spending fell at a 1.2 percent pace after a 2.6 percent increase the previous quarter. Residential construction climbed at a 5 percent rate last quarter after expanding at a 18.9 percent pace in the previous three months. Deere, the world’s largest maker of farm machinery, posted first-quarter profit this month that topped analysts’ estimates and raised its 2010 forecast. Chief Executive Officer Samuel Allen said Feb. 17 that full-year equipment revenue will increase as much as 8 percent. ‘Great Potential’ “Positive developments based on the world’s prospects for population and economic growth hold great potential and should help our company,” he said in a statement. Inflation stayed within the Fed’s long-term forecast range, today’s report showed. The central bank’s preferred price gauge, which is tied to consumer spending and strips out food and energy costs, rose at a 1.6 percent annual pace following a 1.2 percent increase in the prior quarter. The GDP price gauge climbed at a 0.4 percent pace, less than the 0.6 percent median forecast of economists surveyed. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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New York City May Get as Much as 10 Inches of Snow Starting Early Thursday

February 24, 2010

By Brian K. Sullivan and Alex Morales Feb. 24 (Bloomberg) — Snow will probably begin falling in New York City by 3 a.m. tomorrow, and before the storm ends a day later there may be as much as 10 inches (25 centimeters) on the ground, according to the National Weather Service. Between 5 and 10 inches of snow is forecast to fall on New York with as much as 14 inches to the north and west of the city, said Matt Scalora, a weather service meteorologist in Upton, New York . Tomorrow’s snow will be from the second storm to hit the area this week. A system that brought rain to New York City and 12 inches of snow to Albany starting yesterday is now disrupting air traffic in Philadelphia and New York’s La Guardia Airport. It will move into Maine today, said Eric Wilhelm of private- forecaster AccuWeather.com . “A really complex situation is developing in the Northeast,” Wilhelm said by telephone from State College, Pennsylvania. “The Northeast is being impacted by one storm now, and the monster storm is going to impact the region tomorrow into Friday.” Wilhelm said an exact forecast for snowfall in New York will be difficult because a slight variation in the track of the second storm could mean no snow at all for the city or even more than forecast. “It is a very tricky forecast in that zone,” Wilhelm said. More Washington Snow Wilhelm said Washington may receive about 3 inches of snow from the storm, while Boston and Providence, Rhode Island, will likely just experience rain and heavy winds. The storms will add to what’s already been a benchmark winter in the eastern U.S., where seasonal snowfall records were broken in Washington and Baltimore. Philadelphia may receive as much as 8 inches of snow, according to the National Weather Service in Mount Holly, New Jersey. Delays of about an hour were being reported today at LaGuardia airport and about 30 minutes at Philadelphia International Airport, according to the Federal Aviation Administration’s Web site. Winter snow warnings and watches have been issued from northern Virginia to Maine, the weather service reported. A storm watch means snow can be expected within 12 to 36 hours, while a warning means it has already started or is about to begin. Tomorrow’s snow will likely be heavy and wet, Wilhelm said. The storm will also produce high winds through much of the Northeast, he said. High Winds Scalora said wind gusts as intense as 30 miles per hour (48 kilometers per hour) could whip New York. On the Rhode Island and Massachusetts coasts, gusts as high as 70 mph may occur, Wilhelm said. “There could be real problems with power outages,” Wilhelm said. “That could be the real legacy of this storm.” The heavy snow will taper off the day after tomorrow, although snow flurries and clouds will linger over much of the Northeast through the weekend, Wilhelm said. To contact the reporters on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Alex Morales in London at amorales2@bloomberg.net

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Schlumberger Weighs Drilling Future With $11 Billion Acquisition of Smith

February 22, 2010

By David Wethe and Edward Klump Feb. 22 (Bloomberg) — Schlumberger Ltd. , the world’s largest oilfield-services provider, said the $11 billion purchase of Smith International Inc. will broaden service offerings and strengthen its competitive position as advances in drilling technology spur oil and natural gas production. Smith stockholders will get 0.6966 Schlumberger share for each Smith share they own, a value of $44.51 a share based on Feb. 19 closing prices, the companies said yesterday in a statement announcing the all-stock transaction. Future supplies of fossil fuels are increasingly dependent on breakthroughs in drilling techniques to access deposits in difficult-to-reach areas, such as crude oil in ultra-deep water or natural gas locked in hard shale rock, Schlumberger Chief Executive Officer Andrew Gould said in the statement. The company is based in Houston and Paris. “The next breakthrough will be through engineered drilling systems that optimize all the components of the drillstring, allowing our customers to drill more economically in demanding conditions,” Gould said. “Smith’s drilling technologies, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide.” Smith, which owns the M-I Swaco drilling fluids joint venture with Schlumberger, is the second-biggest provider of drill bits, a “critical link” for Schlumberger in offering a full range of drilling products and services, RBC Capital Markets said Feb. 19 in a note to clients. Biggest Merger The acquisition, Schlumberger’s largest, would be the biggest U.S. merger this year, according to Bloomberg data. It’s also the biggest purchase of an oilfield-services company since Bloomberg began tracking merger statistics more than a decade ago. “If anyone was going to buy Smith, Schlumberger was the logical buyer,” said Dan Pickering , an analyst at Tudor Pickering Holt & Co. in Houston. “It was really integrating the bits together with fluids and the other Schlumberger product” lines, he said yesterday in an interview. Schlumberger and Smith have talked off and on about merging over the years, a person with knowledge of the matter said. The two companies came close to reaching a stock-for-stock deal last year, only to have the talks fall apart after Smith’s shares declined following a drop in its earnings, said three people with knowledge of the talks. Falling Profit Schlumberger reported Jan. 22 that its fourth-quarter profit dropped 31 percent to $795 million compared with a year earlier. Smith posted a 90 percent slide in net income to $20.1 million in the same period. A takeover of Smith may prompt antitrust regulators to force asset sales to prevent Schlumberger from having too much market share in certain categories, said Philip Weiss , an analyst at Argus Research in New York. Areas of overlap between the companies include directional drilling and logging of well results, Tudor Pickering said in a Feb. 19 note to clients. The takeover may lead Schlumberger to sell Smith’s distribution business, which provides a range of supplies including pipes for energy companies and had $1.8 billion of sales last year, said Kurt Hallead , an analyst at RBC Capital Markets in Austin, Texas. He rates the shares “outperform” and doesn’t own any himself. National Oilwell Varco Inc. , the oilfield equipment maker, has expressed interest in the business in the past, said two people with knowledge of the matter. One of the people said that Schlumberger may opt to keep the business. Brand Dilution Schlumberger said it expects to see pretax savings of $160 million next year and $320 million in 2012. The purchase of Smith, which also is based in Houston, will add to earnings in 2012. The purchase may dilute Schlumberger’s brand as a technology provider with high margins, Scott Gruber and Ben Dell , analysts at Sanford C. Bernstein & Co., wrote Feb. 19 in a note to investors. “Smith’s products are manufacturing intensive and broadly generate lower margins,” the analysts wrote in the note. At the same time, Schlumberger benefits by gaining sole ownership over the M-I Swaco venture it shares with Smith, Weiss said. Smith has a 60 percent interest in the joint venture, which generated about half of Smith’s $8.2 billion of revenue in 2009. Schlumberger had sales of $22.7 billion last year. Schlumberger has valued its acquisition of Smith at $45.84 a share, a 37.5 percent premium based on the companies’ Feb. 18 closing prices. That was before reports of a potential deal caused Smith to jump 13 percent a day later, or $4.35, to $37.70 on the New York Stock Exchange. That same day, Schlumberger dropped $1.91, or 2.9 percent, to $63.90. In Paris, Schlumberger dropped 47 cents from last week’s New York close to $63.43 a share. Smith rose 12 percent to $42.30 in Germany from a U.S. close of $37.70. The deal is expected to close in the second half of this year, Schlumberger said. Schlumberger was advised on the transaction by Goldman Sachs Group Inc. and Baker Botts LLP, while UBS AG and Wachtell Lipton Rosen & Katz advised Smith. (Schlumberger will host a conference call at 8:30 a.m. New York time. To access the call, go to http://www.slb.com .) To contact the reporters on this story: David Wethe in Houston at dwethe@bloomberg.net ; Edward Klump in Houston at eklump@bloomberg.net

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Schlumberger Weighs Drilling Future With $11 Billion Acquisition of Smith

February 22, 2010

By David Wethe and Edward Klump Feb. 22 (Bloomberg) — Schlumberger Ltd. , the world’s largest oilfield-services provider, said the $11 billion purchase of Smith International Inc. will broaden service offerings and strengthen its competitive position as advances in drilling technology spur oil and natural gas production. Smith stockholders will get 0.6966 Schlumberger share for each Smith share they own, a value of $44.51 a share based on Feb. 19 closing prices, the companies said yesterday in a statement announcing the all-stock transaction. Future supplies of fossil fuels are increasingly dependent on breakthroughs in drilling techniques to access deposits in difficult-to-reach areas, such as crude oil in ultra-deep water or natural gas locked in hard shale rock, Schlumberger Chief Executive Officer Andrew Gould said in the statement. The company is based in Houston and Paris. “The next breakthrough will be through engineered drilling systems that optimize all the components of the drillstring, allowing our customers to drill more economically in demanding conditions,” Gould said. “Smith’s drilling technologies, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide.” Smith, which owns the M-I Swaco drilling fluids joint venture with Schlumberger, is the second-biggest provider of drill bits, a “critical link” for Schlumberger in offering a full range of drilling products and services, RBC Capital Markets said Feb. 19 in a note to clients. Biggest Merger The acquisition, Schlumberger’s largest, would be the biggest U.S. merger this year, according to Bloomberg data. It’s also the biggest purchase of an oilfield-services company since Bloomberg began tracking merger statistics more than a decade ago. “If anyone was going to buy Smith, Schlumberger was the logical buyer,” said Dan Pickering , an analyst at Tudor Pickering Holt & Co. in Houston. “It was really integrating the bits together with fluids and the other Schlumberger product” lines, he said yesterday in an interview. Schlumberger and Smith have talked off and on about merging over the years, a person with knowledge of the matter said. The two companies came close to reaching a stock-for-stock deal last year, only to have the talks fall apart after Smith’s shares declined following a drop in its earnings, said three people with knowledge of the talks. Falling Profit Schlumberger reported Jan. 22 that its fourth-quarter profit dropped 31 percent to $795 million compared with a year earlier. Smith posted a 90 percent slide in net income to $20.1 million in the same period. A takeover of Smith may prompt antitrust regulators to force asset sales to prevent Schlumberger from having too much market share in certain categories, said Philip Weiss , an analyst at Argus Research in New York. Areas of overlap between the companies include directional drilling and logging of well results, Tudor Pickering said in a Feb. 19 note to clients. The takeover may lead Schlumberger to sell Smith’s distribution business, which provides a range of supplies including pipes for energy companies and had $1.8 billion of sales last year, said Kurt Hallead , an analyst at RBC Capital Markets in Austin, Texas. He rates the shares “outperform” and doesn’t own any himself. National Oilwell Varco Inc. , the oilfield equipment maker, has expressed interest in the business in the past, said two people with knowledge of the matter. One of the people said that Schlumberger may opt to keep the business. Brand Dilution Schlumberger said it expects to see pretax savings of $160 million next year and $320 million in 2012. The purchase of Smith, which also is based in Houston, will add to earnings in 2012. The purchase may dilute Schlumberger’s brand as a technology provider with high margins, Scott Gruber and Ben Dell , analysts at Sanford C. Bernstein & Co., wrote Feb. 19 in a note to investors. “Smith’s products are manufacturing intensive and broadly generate lower margins,” the analysts wrote in the note. At the same time, Schlumberger benefits by gaining sole ownership over the M-I Swaco venture it shares with Smith, Weiss said. Smith has a 60 percent interest in the joint venture, which generated about half of Smith’s $8.2 billion of revenue in 2009. Schlumberger had sales of $22.7 billion last year. Schlumberger has valued its acquisition of Smith at $45.84 a share, a 37.5 percent premium based on the companies’ Feb. 18 closing prices. That was before reports of a potential deal caused Smith to jump 13 percent a day later, or $4.35, to $37.70 on the New York Stock Exchange. That same day, Schlumberger dropped $1.91, or 2.9 percent, to $63.90. In Paris, Schlumberger dropped 47 cents from last week’s New York close to $63.43 a share. Smith rose 12 percent to $42.30 in Germany from a U.S. close of $37.70. The deal is expected to close in the second half of this year, Schlumberger said. Schlumberger was advised on the transaction by Goldman Sachs Group Inc. and Baker Botts LLP, while UBS AG and Wachtell Lipton Rosen & Katz advised Smith. (Schlumberger will host a conference call at 8:30 a.m. New York time. To access the call, go to http://www.slb.com .) To contact the reporters on this story: David Wethe in Houston at dwethe@bloomberg.net ; Edward Klump in Houston at eklump@bloomberg.net

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Schlumberger Will Buy Smith International for $11.3 Billion in Stock Deal

February 21, 2010

By David Wethe and Edward Klump Feb. 21 (Bloomberg) — Schlumberger Ltd. , the world’s largest oilfield services company, will buy Smith International Inc. for about $11.3 billion in an all-stock transaction, gaining sole ownership of the biggest drilling-fluids provider. The $45.84-a-share price represents a 37.5 percent premium to Smith’s closing price on Feb. 18. Smith holders will get 0.6966 Schlumberger share for each share they hold, the companies said in a statement. Including its M-I Swaco joint venture with Schlumberger, Houston-based Smith is the world’s largest provider of oil and natural-gas drilling fluids. Smith is the second-biggest provider of drill bits, a “critical link” for Schlumberger in offering a full range of drilling products and services, RBC Capital Markets said Feb. 19 in a note to clients. “Smith’s drilling techniques, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide,” Schlumberger Chief Executive Officer Andrew Gould said in the statement. Pretax Savings Schlumberger, based in Houston and Paris, said it expects to see pretax savings of $160 million next year and $320 million in 2012, with the transaction adding to earnings in 2012. Schlumberger had sales of $22.7 billion last year, a 16 percent drop from 2008. Smith had net debt of $1.2 billion as of the end of 2009, it said in a Jan. 27 statement. The transaction is the biggest U.S. merger for this year and is Schlumberger’s biggest acquisition, according to Bloomberg data. It’s also the biggest acquisition of an oilfield-services company since Bloomberg began tracking merger statistics more than a decade ago. The deal is expected to close in the second half of this year after obtaining the required regulatory and shareholder approvals, Schlumberger said. Schlumberger is getting advice on the transaction from Goldman Sachs Group Inc. and Baker Botts LLP. Smith is using UBS AG and Wachtell Lipton Rosen & Katz. Smith jumped $4.35, or 13 percent, to $37.70 on Feb. 19 in New York Stock Exchange composite trading after reports the companies were in talks. The stock had climbed 39 percent this year. Schlumberger dropped $1.91, or 2.9 percent, to $63.90. “When I look at the fact that Smith has a relatively weak balance sheet and a relatively narrow product offering, I can see why it would be better for Smith in the long run to be acquired,” said Philip Weiss , an analyst at Argus Research in New York, who rates both shares at “sell” and owns none. Investor Note The purchase could dilute Schlumberger’s brand as a technology provider with high margins, Scott Gruber and Ben Dell , analysts at Sanford C. Bernstein & Co. Inc., wrote Feb. 19 in a note to investors. “Smith’s products are manufacturing intensive and broadly generate lower margins,” the analysts wrote in the note. At the same time, Schlumberger benefits by gaining sole ownership over the M-I Swaco venture it shares with Smith, Weiss said. Smith has a 60 percent interest in the joint venture, which generated $4.22 billion of Smith’s $8.22 billion in revenue in 2009. Antitrust Concerns A takeover of Smith could prompt antitrust regulators to force asset sales to prevent Schlumberger from having too much market share in certain categories, said Weiss, the Argus Research analyst. Areas of overlap between the companies include directional drilling and logging of well results, according to a note to clients Feb. 19 by Houston investment bank Tudor, Pickering, Holt & Co. “We would expect a high degree of antitrust scrutiny because of the overall size and scope” of Schlumberger’s operations, Geoff Kieburtz , an analyst at Weeden & Co. in Greenwich, Connecticut, wrote in a note to investors Feb. 19. “However the overlap between business lines is relatively small.” Smith’s Wilson distribution business, which provides a range of supplies including pipes for energy companies, might be sold by Schlumberger because it wouldn’t fit in the company’s long-term plans, said Kurt Hallead , an analyst at RBC Capital Markets in Austin who rates the shares an “outperform” and owns none. Executive Move Schlumberger announced Feb. 8 that Paal Kibsgaard would be its chief operating officer, a move that was expected to give CEO Gould, 63, more time to work on big-picture issues, including potential mergers and acquisitions, said Bill Herbert , an analyst at Simmons & Co. in Houston. Gould previously indicated that mergers could be on the horizon. Consolidation among “smaller” service companies in North America will continue through this year, he told reporters Sept. 8 in Aberdeen, Scotland. Smith chief executive John Yearwood was promoted to CEO of Smith in January 2009. He said in a Dec. 7 interview the company was focused on work related to drilling and completing wells, especially in offshore projects with water depths of more than 1,500 feet (457 meters), and unconventional formations such as shale. Yearwood said Smith expects “impressive” growth from environmental services. To contact the reporters on this story: David Wethe in Houston at dwethe@bloomberg.net . Edward Klump in Houston at eklump@bloomberg.net .

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Video: Apollo Shares Fall as Company Trims Forecast on Bad Debt: Video

February 19, 2010

Feb. 19 (Bloomberg) — Shares of Apollo Group Inc., owner of the second largest university in the U.S., plunged today after the company said second-quarter profits would be lower than expected because of an increase in bad debt. Bloomberg’s Zahra Burton reports. (Source: Bloomberg)

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Russia Lowers Rate Quarter Point to Spur Lending, Curb Strengthening Ruble

February 19, 2010

By Paul Abelsky and Maria Levitov Feb. 19 (Bloomberg) — Russia’s central bank cut its benchmark interest rate for the 11th time since April after earlier cuts proved insufficient to spur lending growth, leaving businesses unwilling to raise investment or hiring. Bank Rossii cut the refinancing rate a quarter of a point to a record low 8.5 percent and the repurchase rate charged on one- and seven-day central bank loans to 7.5 percent from 7.75 percent, effective Feb. 24, it said in a statement today. The bank last lowered the rates by the same amount on Dec. 25. Russia’s economic recovery has been uneven, with a shortage of credit preventing a lasting rebound. Domestic demand remains “unstable” and below pre-crisis levels even as the economy has recently posted improvements in industrial output and real disposable incomes, the central bank said today. The central bank’s mandate is now “to provide further support for the economy,” said Simon Quijano-Evans , head of emerging-market research at Credit Agricole Cheuvreux in Vienna. “There’s scope for more rate cuts. That would help animate bank lending” to households and the corporate sector. Unemployment jumped to 9.2 percent in January, almost matching a credit crisis peak of 9.4 percent a year earlier, and contributing to the slowest December inflation in at least a decade. While oil prices have gained, industrial investment has declined the past 11 months. Economic Risk “The rate cut is undoubtedly necessary because the economy hasn’t fully emerged from the crisis and there is a risk it might not return to the path of stable growth,” said Alexander Morozov , chief economist at HSBC in Moscow, before the decision. The ruble pared losses against the dollar and traded 0.3 percent weaker at 30.1458 at 12:00 p.m. The currency gained 0.2 percent to 40.6931 against the euro. The ruble-denominated Micex stock index fell 0.6 percent to 1330.97. Bank Rossii said the domestic currency market may grow more volatile, increasing foreign-exchange risks, because of external factors including concerns about the pace of the global economic recovery and unsustainable sovereign debts. Russia has lagged behind other central banks in easing monetary policy and will trail them as regulators reverse rate cuts, Bank Rossii said last month. Global Increases Australia, Norway , Israel and Vietnam have raised rates since the peak of the global crisis. China and India have increased reserve requirements for banks to avoid stoking unsustainable lending growth, while the U.S. Federal Reserve yesterday raised the rate charged to banks for direct loans, signaling an end to its emergency measures to supply liquidity to financial markets. Bank Rossii will still be focused on helping sustain the economic recovery and spur bank lending, Quijano-Evans said. The bank reiterated today that it also seeks to use rate cuts to curb speculative gains in the ruble. An 81 percent increase in Urals crude, Russia’s key export blend, since the beginning of last year has boosted the currency’s appeal, while the higher relative interest rate makes the ruble a favorite carry trade. The ruble strengthened 10 percent against the dollar from mid-July through mid-November, the second-best performance of the 26 emerging market currencies tracked by Bloomberg in the period. Russia’s currency yesterday advanced to the strongest level against a dollar-euro basket in almost 14 months, forcing the regulator to buy more than $2 billion to stem the gains. Taming Inflation A stronger ruble has also contributed to keeping a lid on inflation, which eased to an annual 8 percent in January after slowing every month since August. The inflation rate may fall to 7 percent this month, Bank Rossii First Deputy Chairman Alexei Ulyukayev told the Interfax news service yesterday. Consumer-price growth may be between 6.5 percent and 7.5 percent for the year, the government said in a Dec. 30 report . There are no “excessive inflationary risks, which allows us to consider lowering the refinancing rate,” Ulyukayev said in comments confirmed by a central bank official, who declined to be identified because of bank policy. “Intensified disinflation allows for much more aggressive rate cuts by the central bank, which might also need to cut rates in order to ease the existing pressures on the ruble to appreciate,” Vladimir Osakovsky , an economist at UniCredit SpA in Moscow, said in an e-mailed note yesterday. Record Contraction The economy of the world’s biggest energy exporter contracted a record 7.9 percent last year. The statistics office has yet to publish fourth quarter data, though some economists have estimated the decline eased in the final three months. Gross domestic product shrank an annual 2.2 percent last quarter, ING Bank NV said on Feb. 2. That compares with an 8.9 percent decline in the third quarter and a record 10.9 percent slump in the second. There are some signs the domestic economy is picking up. Retail sales last month grew for the first time in a year, on an annual basis. Disposable incomes rose 7.1 percent in January, more than economists surveyed by Bloomberg expected, and the rate of increase was revised up for the previous month. Even so, Russia’s growing debt burden may prevent further easing. The country’s first budget deficit in a decade will widen to 7.2 percent of GDP this year, the government estimates. Bank Rossii will have only “limited scope” for further rate cuts as it weighs global economic uncertainty caused by concerns over unsustainable sovereign debts and Greece’s fiscal woes, said Ivan Tchakarov , an economist at Nomura Holdings Plc in London. “Although the expected further easing in inflation by mid- year may warrant a continuation of rate cuts, we think the central bank will be unwilling to match this one-to-one with the policy rates,” he said. To contact the reporters on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net

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Singapore Says 2010 Economy May Expand 4.5% to 6.5%, Faster Than Expected

February 18, 2010

By Shamim Adam and Shiyin Chen Feb. 19 (Bloomberg) — Singapore raised its economic growth forecast for 2010, adding to evidence of a regional recovery that has prompted policy makers to end some stimulus measures. Gross domestic product will increase by as much as 6.5 percent in 2010, the trade ministry said in a statement today, compared with a previous prediction for growth of as much as 5 percent. The economy contracted 2 percent last year. Singapore is seeking ways to ensure its economy expands in a more sustained manner after three recessions in the past decade, with its most recent slump the worst since independence in 1965. The government is trying to boost services by allowing casino companies such as Genting Singapore Plc to operate as electronics makers move to China and other lower-cost countries. “The steady recovery in global demand has boded well for the performance of the manufacturing sector and should continue to provide the growth impetus for the sector going forward,” said Irvin Seah , an economist at DBS Bank Ltd. in Singapore. “Our view on the services sector is that it should replace the manufacturing sector this year as the key pillar of growth for the economy.” Central banks around the world are starting to raise interest rates or tighten monetary policy as the economic recovery takes hold. The Federal Reserve yesterday increased the discount rate charged to banks for direct loans by a quarter point to 0.75 percent and said the move will encourage financial institutions to rely more on money markets rather than the central bank for short-term liquidity needs. Monetary Policy The Monetary Authority of Singapore said in October it will maintain a zero appreciation stance in its currency policy, refraining from further monetary easing after opting for a de- facto devaluation of the exchange rate in April. Economists are still mixed about the timing of the next move by Singapore’s central bank, which reviews its currency stance twice a year, in April and October. Singapore’s monetary policy stance remains appropriate, the central bank said today. The Singapore dollar fell to S$1.4143 from S$1.4074 versus the U.S. currency as of 10:50 a.m. in Singapore. The benchmark Straits Times Index fell 1 percent to 2,740.96. “Against lingering uncertainties in the external environment, policy makers may remain cautious about the strength of the recovery in the Singapore economy this year,” said Selena Ling , head of treasury research at Oversea-Chinese Banking Corp. in Singapore. “There may be little immediate impetus for a policy tightening come April, especially since there are few signs of stronger global inflationary pressures.” Consumer Prices Inflation will probably average between 2 percent and 3 percent this year, from a previous estimate of between 2.5 percent and 3.5 percent, the government said today. The revision is a result of a rebasing of the consumer price index , it said. The economy grew 4 percent in the fourth quarter from a year earlier, and contracted an annualized 2.8 percent from the previous three months, today’s report showed. The “global recovery that began in the third and fourth quarters of 2009 has gathered momentum and will strengthen over the first half of 2010,” the government said today. “Our view of the second half of 2010 remains unchanged from our assessment three months ago. Several factors continue to cast a shadow on the outlook for the second half of the year and going into 2011.” Singapore will probably incur a third consecutive budget deficit this year as the government unveils another expansionary spending program to boost the island’s productivity in the next decade, economists say. Finance Minister Tharman Shanmugaratnam will outlay this year’s spending plans on Feb. 22. Economic Revamp A government-appointed panel this month outlined seven proposals to restructure the economy including doubling productivity and relying less on foreign labor, a move that may increase costs for companies such as property developer CapitaLand Ltd. and oil-rig builder SembCorp Marine Ltd. Manufacturing, which accounts for about a quarter of the economy, rose 2.2 percent from a year earlier last quarter, after gaining a revised 7.6 percent in the three months through September. Non-oil domestic exports will probably gain between 10 percent and 12 percent in 2010, after shrinking 10.6 percent last year, the trade promotion agency said today. “Singapore’s heavy dependence on external demand means that its economic performance remains highly correlated with the global economic recovery,” said Alvin Liew , an economist at Standard Chartered Bank in Singapore. The island’s services industry grew a revised 4.1 percent last quarter from a year earlier, after falling a revised 2.3 percent in the previous three months. The construction industry gained 11.2 percent, compared with a revised 11.5 percent increase in the third quarter. Genting’s Resorts World Sentosa opened its casino last weekend, attracting more than 35,000 gamblers, newspaper reports say. Singapore aims to lure 17 million visitors and triple annual tourism revenue to S$30 billion by 2015. Las Vegas Sands Corp. says it may open the Marina Bay Sands casino in April. To contact the reporters on this story: Shamim Adam in Singapore at sadam2@bloomberg.net ; Shiyin Chen in Singapore at schen37@bloomberg.net

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Italian M&A Expected to Rebound in 2010 Private Equity, Lawyer Gianni Says

February 18, 2010

By Sonia Sirletti Feb. 18 (Bloomberg) — Italian merger and acquisition activity will rebound in 2010, led by private equity deals, as stock market confidence rises and more cash is available for transactions, according to corporate lawyer Francesco Gianni . “We had several positive indications from private equity funds we have met in the first two months of the year,” Gianni, a senior partner of Gianni, Origoni, Grippo & Partners, said in an interview. “Funds are more interested in looking at files and making investments,” he said. Companies announced 33 billion euros ($45 billion) of mergers and acquisition in Italy in 2009, compared with 42 billion euros a year earlier, according to data compiled by Bloomberg. The value of Italian takeovers last year, when Italy suffered its worst recession since the Second World War, was about 83 percent below the peak of 195 billion euros in 2007. Italian deals may be spurred by liquidity generated from corporate bond sales made in 2009, when the pace of takeovers was penalized by the global financial crisis, Gianni said. European companies sold a record $1.5 trillion of bonds last year, according to Bloomberg data. The energy, utilities and banking industries may be among the most active in 2010, according to the lawyer. Bank Mergers Several lenders, including Banco Popolare SC and Banca Monte dei Paschi di Siena SpA, may need to sell assets to boost capital, Gianni said. “I don’t rule out mergers among small, mid-sized banks to reduce the gap between the biggest five Italian lenders and all the others,” he said. In the energy segment, oil company Eni SpA on Feb. 4 offered to sell stakes in three natural-gas pipelines valued at 1.5 billion euros to meet a European regulator request. In addition, Enel SpA, Italy’s biggest utility, is considering a sale of shares in its Enel Green Power unit. A consolidation in the Italian renewable energy industry is likely because it’s currently dominated by “too many small” companies, Gianni said. His law firm advised on 3.5 billion euros of M&A deals in 2009. Those included advisory work for investment fund F2I in its acquisition of an 80 percent stake of Enel Rete Gas for 516 million euros, and Banca CR Firenze SpA in its 1 billion-euro purchase of Casse del Centro SpA. Gianni, Origoni, Grippo & Partners has more than 300 lawyers based in Rome, Milan, Bologna, Padua, Turin, Brussels, London and New York. The company is the third-biggest Italian law firm by sales, according to data compiled by Top Legal, with 90 million euros of revenue in 2008. To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net

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Italian M&A Expected to Rebound in 2010 Private Equity, Lawyer Gianni Says

February 18, 2010

By Sonia Sirletti Feb. 18 (Bloomberg) — Italian merger and acquisition activity will rebound in 2010, led by private equity deals, as stock market confidence rises and more cash is available for transactions, according to corporate lawyer Francesco Gianni . “We had several positive indications from private equity funds we have met in the first two months of the year,” Gianni, a senior partner of Gianni, Origoni, Grippo & Partners, said in an interview. “Funds are more interested in looking at files and making investments,” he said. Companies announced 33 billion euros ($45 billion) of mergers and acquisition in Italy in 2009, compared with 42 billion euros a year earlier, according to data compiled by Bloomberg. The value of Italian takeovers last year, when Italy suffered its worst recession since the Second World War, was about 83 percent below the peak of 195 billion euros in 2007. Italian deals may be spurred by liquidity generated from corporate bond sales made in 2009, when the pace of takeovers was penalized by the global financial crisis, Gianni said. European companies sold a record $1.5 trillion of bonds last year, according to Bloomberg data. The energy, utilities and banking industries may be among the most active in 2010, according to the lawyer. Bank Mergers Several lenders, including Banco Popolare SC and Banca Monte dei Paschi di Siena SpA, may need to sell assets to boost capital, Gianni said. “I don’t rule out mergers among small, mid-sized banks to reduce the gap between the biggest five Italian lenders and all the others,” he said. In the energy segment, oil company Eni SpA on Feb. 4 offered to sell stakes in three natural-gas pipelines valued at 1.5 billion euros to meet a European regulator request. In addition, Enel SpA, Italy’s biggest utility, is considering a sale of shares in its Enel Green Power unit. A consolidation in the Italian renewable energy industry is likely because it’s currently dominated by “too many small” companies, Gianni said. His law firm advised on 3.5 billion euros of M&A deals in 2009. Those included advisory work for investment fund F2I in its acquisition of an 80 percent stake of Enel Rete Gas for 516 million euros, and Banca CR Firenze SpA in its 1 billion-euro purchase of Casse del Centro SpA. Gianni, Origoni, Grippo & Partners has more than 300 lawyers based in Rome, Milan, Bologna, Padua, Turin, Brussels, London and New York. The company is the third-biggest Italian law firm by sales, according to data compiled by Top Legal, with 90 million euros of revenue in 2008. To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net

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Flaherty Moves to Tighten Canada Mortgage Industry Rules Amid Bubble Talk

February 16, 2010

By Alexandre Deslongchamps and Theophilos Argitis Feb. 16 (Bloomberg) — Canada’s Finance Minister Jim Flaherty tightened rules in the country’s mortgage industry to ensure buyers can afford their homes when interest rates rise. Under the changes for government-backed mortgages, which take effect April 19, buyers will have to meet standards for five-year, fixed-rate mortgages even if they opt for variable rates. Limits on refinancing will be stricter and people buying a home that they don’t occupy must make a down payment of 20 percent. Flaherty, who reiterated he doesn’t see a housing bubble in Canada, today said the three measures will “moderate” the housing market. Record home prices and sales prompted Stephen Jarislowsky , chairman of Montreal-based investment adviser Jarislowsky Fraser Ltd., to say last week he’s “convinced” there’s a bubble in Canada’s housing market fueled by government measures that encourage consumers to take on debt . Flaherty said the changes will prevent borrowers from building up “unsustainable debt levels” and “help Canadians prepare for higher interest rates in the future.” It’s the second time since taking office in 2006 that Flaherty has taken measures to limit the influx of buyers in the market. The Department of Finance in 2008 said the Canada Mortgage and Housing Corp. would limit amortizations to 35 years and offer loan insurance on 95 percent of the loan value, from 40 years and 100 percent previously. Too Tempting “The risk was becoming a bit too tempting for borrowers to take on mortgages they shouldn’t, when rates are at such exceptionally low levels,” said Avery Shenfeld , chief economist with CIBC World Markets in an interview in Toronto. “This is really addressing people who are coming into the market, often young families, and making sure they’re not taking on debt that they can’t afford.” Canadian home prices and resales will grow to records this year boosted by low interest rates , the Canadian Real Estate Association said in a report last week. The group said last month that sales increased in December to a record 46,805 units on a seasonally adjusted basis, up 72 percent from a year ago. “They have basically encouraged people to buy houses based on cheap mortgages,” Jarislowsky, 84, said in a Feb. 11 telephone interview from Montreal. “That has created the opposite effect of what was desirable.” Stress Tests Bank of Canada Governor Mark Carney said in December consumers and banks should be cautious about adding to household debts because a rise in record-low interest rates to “more normal” levels will leave some borrowers unable to pay. Citing a “stress-test” analysis the central bank did of household finances, Carney said that if interest rates rise faster than bond-market yields indicate, almost one in 10 Canadian households could devote at least 40 percent of their income to paying debts, making them “vulnerable.” The requirement for non-resident owners to make a 20 percent down payment will limit the potential for a bubble, said Marc Pinsonneault , an economist with National Bank Financial in Montreal. “It reassures me in the current context, even if I wasn’t predicting a housing bubble,” he said in a telephone interview from Montreal. “People may have convinced themselves that the best investment they could make would be to buy a duplex or a triplex to resell it shortly thereafter.” Pinsonneault said today’s announcement doesn’t change his view that the housing market will gradually slow in the second half of this year. Squeezing Out Borrowers Derek Holt , an economist with Scotia Capital Inc., said the change to force people to qualify for the 5-year, fixed mortgage, means homebuyers would need to qualify for an extra C$200 a month in payments on an average mortgage where a 5 percent down payment is made. “It’s going to sideline a significant proportion of the first-time homebuyer segment,” Holt said. “That change will squeeze out the marginal borrower, because it’s like a 110 basis point rise in the qualifying mortgage rate.” Canada’s average five-year mortgage rate was 5.39 percent on Feb. 10. In May, it was 5.25 percent, the lowest since 1951, according to Bank of Canada figures . Carney has pledged to keep his main interest rate at a record low 0.25 percent through June unless the inflation outlook shifts. “We’re very pleased in the sense that they responded prudently, responsibly and they haven’t overreacted,” said Jim Murphy, president and chief executive of the Canadian Association of Accredited Mortgage Professionals. “The impact overall may be minimal and is very much focused on groups that the minister has concerns about in terms of rising rates.” Murphy, whose group counts 12,000 members, said about 20 percent of new mortgages last year were based on a variable rate and the proportion was rising. Bank of Canada Adviser David Wolf said in a January speech that it’s “premature” to conclude there’s a bubble in the housing market, and that increasing interest rates to slow it would crimp the recovery as the economy emerges from recession. To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net ; Theophilos Argitis in Ottawa at targitis@bloomberg.net

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Indianapolis-based Stone Realty earns second designation for helping homeowners in danger of foreclosure

February 15, 2010

(INDIANAPOLIS, IN – Angie Young of Stone Realty, LLC has attained the Certified Distressed Property Expert (CDPE) designation. Young’s appointment marks the second CDPE designation earned by the Stone Realty Group. As a Certified Distressed Property

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Video: Consonery Says Real Estate `Preeminent’ Concern in China: Video

February 12, 2010

Feb. 12 (Bloomberg) — Nicholas Consonery, Asia specialist at the Eurasia Group, talks with Bloomberg’s Matt Miller and Carol Massar about China’s efforts to cool its economy. China’s central bank took the second step in a month to restrain inflation and damp asset prices, ordering lenders on the eve of a weeklong holiday to set aside larger reserves. (Source: Bloomberg)

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Video: Brynjolfsson Discusses China Economy, Greece Crisis: Video

February 12, 2010

Feb. 12 (Bloomberg) — John Brynjolfsson, chief investment officer of Armored Wolf LLC, talks with Bloomberg’s Matt Miller about the outlook for China’s economy. China’s central bank took the second step in a month to restrain inflation and damp asset prices, ordering lenders on the eve of a weeklong holiday to set aside larger reserves. Brynjolfsson also discuses European Union negotiations on Greece’s plans to reduce its deficit. (This is an excerpt. Source: Bloomberg)

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Video: Sargen Says Reserve Requirement Won’t End China Growth: Video

February 12, 2010

Feb. 12 (Bloomberg) — Nick Sargen, chief investment officer at Fort Washington Investment Advisors, talks with Bloomberg’s Matt Miller and Carol Massar about the impact of Chinese central bank policy on the U.S. stock market and the outlook for China’s economy. Sargen also discusses Federal Reserve monetary policy. The People’s Bank of China took the second step in a month to restrain inflation and damp asset prices, ordering lenders on the eve of a weeklong holiday to set aside larger reserves. (Source: Bloomberg)

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U.S. Retail Sales Climb, Confidence Slips in Sign Spending Will Be Gradual

February 12, 2010

By Bob Willis and Courtney Schlisserman Feb. 12 (Bloomberg) — January sales at U.S. retailers climbed more than anticipated, while consumer confidence unexpectedly fell this month from a two-year high, showing a recovery in household spending may be gradual. Retail purchases increased 0.5 percent, the third gain in the past four months, Commerce Department figures showed today in Washington. The Reuters/University of Michigan’s consumer sentiment gauge dropped to 73.7 from 74.4 the prior month. The economic expansion is being fueled by gains in manufacturing and business investment that reflect growing demand from overseas and efforts to rebuild inventories. Americans, shaken by the loss of 8.4 million jobs during the recession, will probably be slow to regain the confidence needed to spearhead the next phase of the recovery. “The good news is that consumers are still spending even though they are worried,” said Nariman Behravesh , chief economist at IHS Global Insight in Lexington, Massachusetts, who projected the rebound in sales and setback in confidence. “Spending is decent enough to provide a foundation for growth. For now, this is going to be a business-led recovery.” Stocks fell today after China unexpectedly increased bank reserve requirements for a second time in a month to cool the world’s fastest growing major economy. The Standard & Poor’s 500 Index dropped 0.3 percent to 1,074.92 at 12:43 p.m. in New York. Treasuries climbed, pushing the yield on the benchmark 10-year note down to 3.68 percent from 3.72 percent late yesterday. Stockpiles Drop A third report today showed inventories at U.S. businesses unexpectedly fell in December for the first time in three months as companies couldn’t keep up with increasing demand. Macy’s Inc . and Gap Inc. are among retailers driving profits up by keeping stockpiles lean after the biggest household spending slump in three decades. Retail sales were projected to rise 0.3 percent, according to the median estimate of 82 economists in a separate Bloomberg survey. Forecasts ranged from a decline of 1 percent to a 0.7 percent gain. The Commerce Department also revised the December decrease in purchases to 0.1 percent from 0.3 percent. Purchases excluding autos climbed 0.6 percent, also exceeding the survey median, which called for 0.5 percent gain. “Consumers showed continued improvement,” said John Herrmann , chief economist at Herrmann Forecasting in Summit, New Jersey. “Consumers are still relatively cautious, spending what they’re making and not taking on debt.” Broad-based Gains Nine of 13 major categories showed gains in sales last month, led by general merchandise stores, grocery stores and non-store retailers. Sales at non-store retailers, which include Internet retailers, rose 1.6 percent after a 2.2 percent gain in December. Amazon.com Inc . reported Jan. 28 that its fourth-quarter profit and sales beat analysts’ estimates as shoppers took advantage of holiday discounts and free shipping. Sales at 31 chains rose 3 percent last month, the International Council of Shopping Centers said Feb. 4, beating its forecast of a 1 percent gain. Lower inventories helped stores reduce markdowns, which boosted sales volume and profit margins, said Mike Niemira , the ICSC’s chief economist. Macy’s, the second-largest U.S. department-store company, last week said sales at stores open at least a year gained 3.4 percent in January, helped by online purchasing. The Cincinnati- based retailer said fourth-quarter profit exceeded its forecast. Less ‘Fear’ “We’re not seeing the fear factor we saw last year,” retail analyst Dana Telsey , founder of Telsey Advisory Group in New York, said in an interview on Bloomberg Radio. The consumer sentiment index was forecast to rise to 75, according to the median of 74 economists surveyed by Bloomberg News. The measure averaged 88.9 during the expansion that ended December 2007. Today’s report showed the measure of current conditions, which reflects Americans’ perceptions of their own finances and whether it’s a good time to buy big-ticket items such as cars and homes, rose to 84.1 this month from 81.1 in January. The index of expectations six months from now, which more closely projects the direction of consumer spending, decreased to 66.9 from 70.1 last month. The jobless rate unexpectedly fell to 9.7 percent last month from 10 percent in December, figures from the Labor Department showed last week. A 20,000 drop in payrolls served as a reminder that the labor market has yet to fully recover. The U.S. economy, the world’s largest, expanded 5.7 percent in the last three months of 2009, the most in six years, the Commerce Department said last month. Consumer spending grew at an average 2.4 percent pace in the last six months of the year. For all of 2009, household purchases dropped 0.6 percent, the worst performance since 1974. Consumer purchases , which account for 70 percent of the economy, will grow at a 2.3 percent rate in the second half of this year and expand 2.5 percent in 2011, according to the median estimates of economists surveyed this month. By comparison, spending rose 3.3 percent on average over the two decades through 2007. To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net ; Courtney Schlisserman in Washington cschlisserma@bloomberg.net

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Retail Sales in U.S. Rise More Than Forecast as Consumer Spending Recovers

February 12, 2010

By Bob Willis Feb. 12 (Bloomberg) — Sales at U.S. retailers climbed in January for the third time in four months, signaling the consumer spending recovery that began in late 2009 continues into the new year. The 0.5 percent increase was larger than forecast and followed a 0.1 percent drop the prior month that was smaller than previously estimated, Commerce Department figures showed today in Washington. Purchases excluding autos rose 0.6 percent. A drop in unemployment and a longer workweek last month signal the economy is poised to generate jobs, which will lead to gains in income that may further lift demand. Macy’s Inc . and Gap Inc. are among retailers driving profits up by keeping stockpiles lean after the biggest household spending slump in three decades. “Consumers showed continued improvement,” said John Herrmann, chief economist at Herrmann Forecasting in Summit, New Jersey. “Consumers are still relatively cautious, spending what they’re making and not taking on debt.” Stock-index futures held earlier losses after the report, depressed by China’s efforts to cool its economy. The contract on the Standard & Poor’s 500 Index fell 0.5 percent to 1,070.8 at 8:48 a.m. in New York. Retail sales were projected to rise 0.3 percent after an originally reported 0.3 percent drop in December, according to the median estimate of 82 economists in a separate Bloomberg survey. Forecasts ranged from a decline of 1 percent to a 0.7 percent gain. Purchases excluding autos were projected to increase 0.5 percent, according to the survey median. Broad-based Gains Nine of 13 major categories showed gains in sales last month, led by general merchandise stores, grocery stores and non-store retailers. Auto sales were unchanged after rising 0.1 percent in December. Industry data earlier this month, which are the figures used by the government to calculate gross domestic product, showed purchases fell for the first time in four months. Sales at non-store retailers which include Internet retailers, rose 1.6 percent after a 2.2 percent gain in December. Amazon.com Inc . reported Jan. 28 that its fourth-quarter profit and sales beat analysts’ estimates as shoppers took advantage of holiday discounts and free shipping. Influence on Growth Excluding autos, gasoline and building materials — the retail group the government uses to calculate GDP figures for consumer spending — sales climbed 0.8 percent after a 0.3 percent decrease. The government uses data from other sources to calculate the contribution from the three categories excluded. Sales at 31 chains rose 3 percent last month, the International Council of Shopping Centers said Feb. 4, beating its forecast of a 1 percent gain. Lower inventories helped stores reduce markdowns, which boosted sales volume and profit margins, said Mike Niemira, the ICSC’s chief economist. “The retail recovery continues,” Niemira said in a telephone interview. Macy’s, the second-largest U.S. department-store company, last week said sales at stores open at least a year gained 3.4 percent in January, helped by online purchasing. The Cincinnati- based retailer said fourth-quarter profit exceeded its forecast. Less Unemployment The jobless rate unexpectedly fell to 9.7 percent last month from 10 percent in December, figures from the Labor Department showed last week. A 20,000 drop in payrolls served as a reminder that the labor market has yet to fully recover. The U.S. economy, the world’s largest, expanded 5.7 percent in the last three months of 2009, the most in six years, the Commerce Department said last month. Consumer spending grew at an average 2.4 percent pace in the last six months of the year. For all of 2009, household purchases dropped 0.6 percent, the worst performance since 1974. Consumer purchases , which account for 70 percent of the economy, will grow at a 2.3 percent rate in the second half of this year and expand 2.5 percent in 2011, according to the median estimates of economists surveyed this month. By comparison, spending rose 3.3 percent on average over the two decades through 2007. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

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Video: Xie Says China Has to Raise Rates Soon to Stem Inflation: Video

February 12, 2010

Feb. 12 (Bloomberg) — Andy Xie, an independent analyst and former chief Asia economist at Morgan Stanley, talks with Bloomberg’s Jon Erlichman and Deirdre Bolton about the Chinese central bank’s policy and concerns about rising inflation in the nation. China ordered banks to set aside more deposits as reserves for the second time in a month to cool the fastest-growing economy. The reserve requirement will increase 50 basis points effective Feb. 25, the People’s Bank of China said on its Web site today. (Source: Bloomberg)

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BHP Billiton earnings increased in the second half

February 10, 2010

BHP Billiton earnings increased

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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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Institutional Investor Magazine Names Toll Brothers to Its 2010 All-America Executive Team

February 9, 2010

HORSHAM, Pa., Feb. 9, 2010 (GLOBE NEWSWIRE) — Toll Brothers, Inc. (NYSE:TOL), (www.tollbrothers.com), the nation’s leading builder of luxury homes, today announced that Institutional Investor has ranked Toll Brothers’ chairman and chief executive officer Robert I. Toll as the top CEO in the Homebuilders & Building Products industry for the third year in a row, chief financial officer Joel H. Rassman as the top CFO within the Homebuilders & Building Products industry for the fifth year in a row, Toll Brothers as the company with the “Best Investor Relations” for the Homebuilders & Building Products industry for the second year in a row and Frederick Cooper, Senior Vice President Finance, International Development and Investor Relations, as the top Investor Relations professional within the Homebuilders & Building Products industry. Institutional Investor went on to name Toll Brothers as the 2010 All-America Executive Team for the Homebuilders & Building Products industry.

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Sugar Shortage May Turn Acute in Third Quarter on Demand From U.S., Mexico

February 9, 2010

By Thomas Kutty Abraham Feb. 9 (Bloomberg) — A global sugar shortage, which drove prices to the highest level in three decades, may peak in the third quarter this year on demand from the U.S., Mexico, India and Pakistan, according to U.K.-based Tropix Capital Management. “As we enter the second quarter, we enter the inter-crop period for South Brazil when export supply is minimal,” Sean Diffley , founder of the hedge fund and former head of sugar trading at ED&F Man Holdings Ltd., said by email. “Countries like Russia will return to the market in force. The acutest part of the deficit may not be apparent until the third quarter.” India, China, Indonesia, Pakistan, Egypt and Russia are among countries planning to buy sugar to cool domestic prices, worsening a deficit that may reach 11.92 million tons in the year ending April 30, up from 8.32 million tons predicted in October, Kingsman SA said yesterday. The shortfall may be 5 million to 6 million tons this season, according to Tropix. “The world stocks-to-use ratio should reach 20 year lows in the second half of this year,” said Diffley, who worked for 16 years at ED&F Man, one of the biggest sugar trader. India, the biggest user, may need to import an extra 2.5 million to 3 million tons this season to meet a 7 million ton deficit, according to Kingsman. Pakistan, Asia’s third-biggest user, plans to purchase 1.25 million tons by June. The country “apparently bought 100,000 tons” from Cargill Inc. in the past few days, Michael McDougall , a Newedge USA senior vice president said yesterday in a report from an industry event in Dubai. China Drought China, the biggest consumer after India, may have a deficit of 3.3 million tons this year after drought and cold weather cut yields, the Guangxi Bulk Sugar Exchange Center said last month. Thailand, the second-biggest exporter, may produce 7.2 million tons in the year started in November, less than the forecast. “There’s a real rationale to be invested in sugar, at least until March,” when the Brazilian harvest begins, Hussein Allidina, head of commodity research at Morgan Stanley, said in an interview in Dubai. Prices will extend gains as a deficit was expected to last through the season ending Sept. 30, he said. Sugar output in Brazil, the top producer, may increase by as much as 4.4 million tons to 35.3 million tons in 2010-2011, as growers boost planting to take advantage of record prices, Plinio Nastari , president of research firm Datagro, said in an interview on Feb. 7 in Dubai. The global sugar market may have a surplus of 1.5 million tons next year, he said. “The forward sugar curve already reflects the assumption that Brazilian production will rebound significantly,” Diffley said. “If we see another rainy harvesting period we may not see the surplus in 2010-11 that analysts are assuming is a given.” ‘Fundamental Backing’ Raw-sugar futures for March delivery gained as much as 2.6 percent to 27.28 cents a pound in after-hours electronic trading on ICE Futures U.S., and were at 27.27 cents at 2:44 p.m. Mumbai time. Prices fell 12 percent last week, the biggest weekly drop since October 2008. “During the last great sugar bull-run, the market often paused for breath and consolidated for weeks before pushing sharply higher,” said Diffley. “We believe that sugar’s rally has a sound fundamental backing.” Sugar had its biggest annual advance since 1974 last year as heavy rains and drought pared harvests in Brazil and India, the largest growers. Futures reached 30.4 cents on Feb. 1, the highest since January 1981. “The last time around when prices rose above 30 cents, it stayed at that level for six months,” Jonathan Drake , head of sugar business at Cargill Inc. said in an interview. “Going by history, prices are going to stay high for at least six months. High prices will also be accompanied by greater volatility.” To contact the reporter on this story: Thomas Kutty Abraham in Dubai at tabraham4@bloomberg.net

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Retail Sales Probably Rose in Sign U.S. Consumers Will Help Economy Grow

February 6, 2010

By Timothy R. Homan Feb. 7 (Bloomberg) — The rebound in spending that gave U.S. retailers a lift during the holiday season probably carried over into the new year, signaling consumers may contribute more to growth, economists said before reports this week. Sales climbed 0.3 percent in January, the third gain in four months, according to the median forecast of 51 economists surveyed by Bloomberg News before Commerce Department figures Feb. 11. Another report may show the trade gap fell in December. A drop in unemployment last month, combined with a longer workweek and rising wages, signals the economy is poised to generate jobs, leading to gains in income that may boost sales at companies like Macy’s Inc. and Gap Inc. Retailers have kept inventories in check, resulting in fewer markdowns that point to increases in volumes and profit margins. “Consumers have shown an increased willingness to spend,” said Maxwell Clarke , chief U.S. economist at IDEAglobal in New York. “We see improved prospects stemming from gradual stabilization in labor markets.” Auto sales probably cooled last month, restraining the overall increase, economists said. Vehicles sales fell in January after three months of gains, industry figures showed last week. Excluding automobiles, sales probably rose 0.5 percent after a 0.2 percent decrease the previous month, according to the survey median. Sales at Macy’s Macy’s, the second-largest U.S. department-store company, said in a statement last week that sales at stores open at least a year gained 3.4 percent in January, helped by online purchasing. The Cincinnati-based retailer said fourth-quarter profit exceeded its forecast. Purchases at 31 chains rose 3 percent last month, the International Council of Shopping Centers said Feb. 4, beating the 1 percent increase the group anticipated. The jobless rate unexpectedly fell to 9.7 percent last month from 10 percent in December, figures from the Labor Department showed last week. The median forecast of economists surveyed anticipated no change. A 20,000 drop in payrolls served as a reminder that the labor market has yet to fully recover. The U.S. economy, the world’s largest, expanded 5.7 percent in the last three months of 2009, the most in six years, the Commerce Department said last month. Consumer spending grew 2 percent during that period. As the economy expanded in the second half of last year, the Standard & Poor’s 500 Index rose 21 percent. Stocks have declined 4.4 percent since the beginning of the year as China stepped up efforts to curb lending, the Obama administration proposed rules to rein in risk-taking at banks and concern grew over government debt levels in Greece, Spain and Portugal. Business Investment Manufacturing gains, spurred by business investment in new equipment and growth overseas, probably boosted U.S. exports, helping to narrow the trade gap , economists project a Feb. 10 report from the Commerce Department will show. The deficit probably shrank to $35.5 billion in December from $36.4 billion the prior month, according to the survey median. Inventories in the U.S. probably rose in December for a third straight month, economists said ahead of a Feb. 11 Commerce Department report. Stockpiles increased 0.3 percent after 0.4 percent in November as businesses gained confidence in the strength of the U.S. recovery, the survey showed. Consumers may also be turning more confident. The Reuters/University of Michigan preliminary sentiment index for February, due Feb. 12, probably rose to 75, the highest level since January 2008, from 74.4 last month, the survey showed. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Initial Jobless Claims in U.S. Unexpectedly Climbed to 480,000 Last Week

February 4, 2010

By Timothy R. Homan and Bob Willis Feb. 4 (Bloomberg) — More Americans unexpectedly filed first-time claims for unemployment insurance last week, indicating companies lack confidence the economic recovery will be sustained. Initial jobless applications increased to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance was little changed and those receiving extended benefits increased. An unemployment rate that’s projected to average 10 percent this year will likely weigh on consumer spending, preventing the biggest part of the economy from accelerating. Without additional gains in sales, companies will be forced to keep cutting costs, limiting staff in order to boost profits. “The pace of improvement has slowed significantly in the last two months,” said Anna Piretti, a senior economist at BNP Paribas in New York. “This points to downside risk for consumption and the rest of the economy.” Stock-index futures extended losses and Treasury yields fell after the report. The contract on the Standard & Poor’s 500 Index dropped 0.9 percent to 1,086.5 at 8:55 a.m. in New York. The yield on the 10-year Treasury note declined to 3.66 percent from 3.71 percent late yesterday. Initial jobless claims were forecast to decline to 455,000 from a previously reported 470,000 the week before, according to the median estimate of 46 economists surveyed by Bloomberg News. Estimates ranged from 420,000 to 480,000. More Productivity Worker productivity kept surging in the fourth quarter as companies squeezed more out of remaining staff to boost earnings, another report from the Labor Department also showed. A measure of employee output per hour rose at a 6.2 percent annual rate, capping a 2.9 percent gain for all of 2009 that was the biggest one-year increase since 2003. Labor costs dropped at a 4.4 percent pace last quarter and fell 0.9 percent for all of 2009, the biggest drop in seven years. The four-week moving average of claims increased to 468,750 from 457,000 the prior week. Continuing claims were little changed at 4.6 million in the week ended Jan. 23. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Today’s report showed the number of people who’ve used up their traditional benefits and are now collecting extended payments increased by about 242,000 to 5.86 million in the week ended Jan. 16. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.5 percent in the week ended Jan. 23, today’s report showed. Payroll Forecast The figures raise concern the improvement in the labor market has stalled heading into tomorrow’s monthly employment report. The U.S. may have created 15,000 jobs in January, according to the median forecast of economists surveyed. It would mark the second payroll increase in the past three months. The unemployment rate probably held at 10 percent in January for a third straight month, close to the 26-year high of 10.1 percent reached in October, the economists forecast. A private report yesterday showed companies in the U.S. cut an estimated 22,000 jobs in January. The drop was the smallest in two years and followed a revised 61,000 decrease the prior month, according to data from ADP Employer Services. More Dismissals Macy’s Inc., the second-biggest U.S. department-store chain, is eliminating 1,500 store-level positions effective March 6, two people familiar with the decision said last week. The Cincinnati-based retailer is firing department managers and merchandising team managers, said the people, who declined to be identified because the cuts haven’t been made public. Some stores are losing operations managers, and the remainder will be shared across multiple stores, the people said. In addition, full-time stock positions were cut, they said. Other companies are adding to payrolls. General Electric Co. is hiring workers in energy, health care and rail transportation in part because global economic-stimulus policies have created demand, two executives said last week. GE is bidding to supply new passenger locomotives for Amtrak, and in November announced a joint venture in China that would make high-speed rail locomotives that may add 200 U.S. jobs. “We will create jobs in the United States that could not have been created any other way,” John Rice, chief executive officer of GE Technology Infrastructure, said in an interview with Bloomberg Television from Davos, Switzerland, last week. The loss of 7.2 million jobs since the recession began has been the worst in the post-World War II era. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Bob Willis at bwillis@bloomberg.net

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European, U.S. Stocks Retreat as Dollar, Emerging-Market Equities Advance

February 3, 2010

By Rita Nazareth Feb. 3 (Bloomberg) — Stocks in the U.S. and Europe fell, commodities slipped and the dollar rose following disappointing results at companies from Pfizer Inc. to Ryder Systems Inc. and slower-than-estimated growth in U.S. service industries. The Standard & Poor’s 500 Index slipped 0.4 percent to 1,099.23 at 11:16 a.m. in New York after surging 2.7 percent over the previous two days, its biggest jump since October. The Dollar Index climbed 0.4 percent in its first gain this week. The yield on the 10-year Treasury note increased four basis points to 3.68 percent. Copper, lead and zinc each lost at least 2 percent to lead declines in industrial metals. Ryder, the largest U.S. truck-leasing company, tumbled after last year’s recession caused a slump in cargo shipments. MetLife and Pfizer also led U.S shares lower as the life insurer’s yearend book value trailed its forecast and the drugmaker’s results were hurt by costs from its Wyeth acquisition. The Institute for Supply Management’s service- industry index rose to 50.5, signaling growth yet still trailing economist estimates. “Investors are in a show-me-mentality right now,” said Michael Mullaney , who manages $9.5 billion at Fiduciary Trust Co. in Boston. “There are still some clouds out there. We saw two blue chip companies disappointing.” Materials and industrial companies in Asia followed yesterday’s rally in U.S. equities after pending home sales rose 1 percent, adding to signs of growth in the world’s biggest economy. The MSCI Emerging Markets Index added 1.3 percent, its biggest gain in a month. China’s Shanghai Composite Index rose 2.4 percent and India’s Sensex Index advanced 2.1 percent, the biggest gains in six weeks for both. Asian Rally The MSCI Asia Pacific Index advanced 1.1 percent, posting its first back-to-back advance in three weeks. Esprit, the biggest Hong Kong-listed clothier, gained 7.9 percent after posting better-than-estimated profit. Losses in the U.S. were limited as companies including News Corp. rallied on higher-than-estimated earnings. A record nine-quarter profit slump for S&P 500 companies is projected to have ended in the final three months of 2009, and about 81 percent of earnings since Jan. 11 beat the average of Wall Street estimates, according to data compiled by Bloomberg. “While investors have been a bit cautious over the course of the past two weeks, they should continue to focus on the corporate profitability picture that is rebounding fast,” said Henk Potts at Barclays Stockbrokers Ltd. in London, which oversees about $218 billion. “Monetary tightening may drive the market into a bumpier road in the second half, but it should not be a matter of concern for at least the first half.” Jobless Concern U.S. joblessness threatens to undermine stocks, according to Mohamed A. El-Erian , Chief Executive Officer of Pacific Investment Management Co. U.S. Companies cut an estimated 22,000 jobs in January, in line with forecasts, according to an ADP Employer Services report today. Economists surveyed by Bloomberg News anticipate the government’s report Feb. 5 will show the U.S. created jobs in January for the second time in the past three months. “I sense quite a gap between consensus market expectations and key political and economic realities, especially in the U.S.,” El-Erian wrote in a Bloomberg News column. “If the gap isn’t bridged by the validation of the more optimistic expectations, investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes.” The S&P 500 slumped 3.7 percent in January, its biggest loss in 11 months. IPO Postponed Imperial Capital Group Inc. postponed its $113 million initial public offering, becoming the second U.S. company to shelve an IPO in 2010. The 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. Europe’s Dow Jones Stoxx 600 Index slipped 0.5 percent today. Electrolux AB , the world’s second-biggest appliance maker, plunged 13 percent in Stockholm, the biggest drop in three years, after earnings missed estimates. A benchmark gauge of corporate credit risk in North America declined for the third day, reaching an almost two-week low. Credit-default swaps on the Markit CDX North America Investment- Grade Index Series 13, which is linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, declined 1.25 basis point to 91.25 basis points as of 8 a.m. in New York, according to broker Phoenix Partners Group. Bond Sales Kraft Foods Inc. is planning to sell at least $4 billion of debt due in 3.25, 6, 10 and 30 years to pay for its acquisition of Cadbury Plc, according to a person familiar with the offering. The bonds may be sold today or tomorrow, said the person, who declined to be identified because terms aren’t set. Kraft plans to issue a minimum of $1 billion of securities of each maturity, the person said. McClatchy Co.’s $875 million of senior secured notes due in 2017 may yield about 11.75 percent, according to a person familiar with the offering. The publisher may sell the debt as soon as tomorrow, said the person, who declined to be identified because the terms aren’t yet set. Crude oil for March delivery in New York fluctuated after yesterday’s 3.8 percent jump. Copper for delivery in three months lost 2 percent to $6,676.25 a metric ton on the London Metal Exchange. Gold for immediate delivery fluctuated. The dollar added 0.3 percent against the euro and rose 0.6 percent compared with the yen. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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ISM Services Expands for a Second Consecutive Month, Yet Fails to Meet Expectations!

February 3, 2010

ISM Services Expands for a Second Consecutive Month, Yet Fails to Meet Expectations!

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Home Prices in 20 U.S. Cities Gain a Sixth Month, Case-Shiller Index Shows

January 26, 2010

By Bob Willis Jan. 26 (Bloomberg) — Home prices in 20 U.S. cities rose in November for the sixth consecutive month, signaling the industry that precipitated the worst recession since the 1930s is stabilizing. The S&P/Case-Shiller home-price index increased 0.2 percent from the prior month on a seasonally adjusted basis, after a 0.3 percent rise in October, the group said today in New York. The gauge was down 5.3 percent from November 2008, exceeding expectations and the smallest year-over-year decline in two years. A government tax credit for first-time home buyers due to expire in November helped boost home sales, contributing to higher prices in some markets. A projected increase in foreclosures this year as unemployment is slow to drop is a reminder that property values may not firm much more. “We’re seeing what looks to be a bottoming out in prices,” said Michelle Meyer , an economist at Barclays Capital Inc. in New York. “There is a risk we see further downside, given the large amount of foreclosures set to enter the market and the uncertainty of the effects of the homebuyer tax credit on prices.” Another report showed consumer confidence this month increased more than anticipated as the job market improved. The Conference Board’s index increased to 55.9, the highest level since September 2008, the New York-based private research group said. Stocks Fall Stocks reversed earlier declines following the confidence report. The Standard & Poor’s 500 Index was up 0.1 percent to 1,098.21 at 10:17 a.m. in New York. Treasury securities rose. Economists surveyed by Bloomberg News anticipated prices would drop 5 percent in the 12 months to November, based on the median estimate of 27 projections. Estimates ranged from declines of 4.5 percent to 6 percent. From the July 2006 peak, the 20-city index was down 29 percent. Compared with the prior month, 14 of the 20 areas covered showed an increase on a seasonally adjusted basis while six had a decline. The biggest month-to-month gain was in Phoenix, which increased 1.6 percent. New York showed the biggest drop at 0.9 percent. California Rebound San Francisco posted the second-biggest increase, at 1.5 percent, followed by 1 percent gains each in Los Angeles and San Diego, and a 0.9 percent gain in Portland, Oregon. “Some of the boom-to-bust markets in California are starting to see home prices appreciate as demand returns,” said Meyer. All of the 20 cities in the S&P/Case-Shiller index showed a smaller year-over-year decline in November. Four cities posted year-over-year gains in prices, led by Dallas, which saw a 1.4 percent gain from November 2008. San Francisco, Denver and San Diego rounded out the gainers. A report today from the Federal Housing Finance Agency showed home prices rose 0.7 percent nationally in November from the prior month. The index tracks only loans that conform to Fannie Mae and Freddie Mac limits. As home values firmed and stocks climbed in the second and third quarters of 2009, households recovered almost $5 trillion of the record $17.5 trillion in wealth lost since 2007, showing there remained much ground to make up. The monthly price increases have diminished since the index climbed an average 1 percent in July and August, indicating foreclosures may again be hurting property values. Record Foreclosures A record 3 million U.S. homes will be repossessed by lenders this year as high unemployment and depressed home values leave borrowers unable to make mortgage payments or sell, according to a RealtyTrac Inc. forecast on Jan. 14. Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005. KB Home , the Los Angeles-based homebuilder that sells to first-time buyers, is among homebuilders struggling. The company Jan. 12 reported a pretax loss of $91 million on declining revenue for the fiscal fourth quarter that ended Nov. 30. KB Home is “not going to make money in the first quarter” and plans to “restore profitability” in the second half of 2010, Chief Executive Officer Jeffrey Mezger said Jan. 12 in a conference call with analysts and investors. The end of Federal Reserve purchases of mortgage-backed securities aimed at keeping borrowing costs low represents another challenge for the industry. The program is scheduled to expire by March 31. Fed Meeting Policy makers meet today and tomorrow to discuss the direction of the benchmark lending rate between banks. The emergency programs were being wound down “in light of ongoing improvements in the functioning of financial markets,” central bankers said in their Dec. 16 statement. Karl Case , a former economist professor at Wellesley College, and Robert Shiller , chief economist at MacroMarkets LLC and a professor at Yale University, created the home-price index based on research from the 1980s. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Chinese Steelmakers Face Iron Ore Price Squeeze as ArcelorMittal Revives

January 24, 2010

By Bloomberg News Jan. 25 (Bloomberg) — Chinese steelmakers, the world’s largest buyers of iron ore , face escalating costs for the steelmaking ingredient as global rivals ArcelorMittal and Posco increase output to feed resurgent demand in developed economies. 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. That compares with the 14 percent gain forecast in October. Nomura Inc. and Bank of America Merrill Lynch expect a 50 percent jump. The demand revival will benefit BHP Billiton Ltd. , Rio Tinto Group and Vale SA, the three largest suppliers of iron ore. The global recession forced miners to slash prices by 33 percent in 2009, the first reduction in seven years. “The big mills in China have been driving the price, but now capacity outside China is picking up,” Colin Hamilton , a Macquarie Securities Group analyst in London, said by phone. “There is pressure on producers to deliver into Europe and elsewhere, which is exacerbating the tightness.” ArcelorMittal, the world’s biggest steelmaker, is raising production as Posco predicts global steel demand will rise 10 percent this year. Supply concern has prompted “panic buying” of iron ore by the Chinese, Goldman Sachs JBWere Pty. said this month, as prices of ore for immediate delivery jumped to a 13- month high. Iron ore demand from China, led by Baosteel Group Corp., may rise 6.2 percent this year, while purchases in the rest of the world may surge 16 percent, Morgan Stanley’s chief metals economist Peter Richardson forecast this month. Global Recovery “The global recovery, excluding China, may add 100 million tons of crude steel output this year,” Xu Xiangchun , chief analyst with Mysteel Research Institute in Beijing, said. “Iron ore price negotiations will probably be concluded quickly because the situation is very clear that prices must rise.” Iron ore for immediate delivery into China surged to a 13- month high of $131.20 a metric ton on Jan. 8, according to The Steel Index . Japanese steelmakers agreed to contract prices of about $61 a ton, excluding freight, in 2009. The Chinese increased purchases on the cash spot ore market after rejecting the 33 percent cut for contract delivery as too small. A Chinese agreement may be possible this year as the steelmakers “are under pressure because the alternative is to not agree to a higher contract price and to align themselves with spot, which is currently much higher,” said Daniel Fairclough , an analyst at ICAP Equities in London. Chinese iron ore imports will climb to 667 million tons this year, from a record 628 million tons in 2009, according to Morgan Stanley. Consumption outside of China will leap to 329 million tons from 283 million tons, the brokerage said. Demand Revival BHP, Rio and Vale gets about $44.3 billion in combined annual sales from iron ore, according to data for the latest available period compiled by Bloomberg. London-based Rio, the second-largest supplier, said demand is recovering after reporting a 49 percent jump in fourth- quarter output on Jan. 14. Recovery in markets outside of China may tighten supplies, Vale, the largest producer, said Jan. 19. ArcelorMittal said in October the rebound in steel demand will push capacity usage in the fourth quarter to about 70 percent, from 61 percent in the previous quarter. The Luxembourg-based company may swing to a $3.8 billion profit this year from a forecast $389 million loss in 2009, while Japan’s Nippon Steel Corp ., the second-largest steelmaker, may post an 11-fold gain, according to estimates compiled by Bloomberg. South Korea’s Posco, Asia’s most profitable mill, said Jan. 14 it will raise output by 17 percent this year. Japanese Steel Crude steel output in Japan, the world’s second-biggest producer, may reach 105 million tons for the year starting April 1, UBS AG’s Atsushi Yamaguchi wrote Jan. 13. That’s 8.2 percent higher than the 97 million tons estimated for the previous year. A shortage of steel may help U.S. Steel Corp., the largest American producer, raise prices, JPMorgan Chase & Co. said in a Jan. 7 report. Consumption in the U.S., Europe and Japan may surge by between 12.4 percent and 19 percent in 2010, the World Steel Association forecast Oct. 12. “Japan will probably outpace Europe in demand recovery this year,” said Geoffrey Cheng , a Hong Kong-based analyst with Daiwa Securities Group Inc. “Global steel output may return to the levels before 2009, while iron ore suppliers have been expanding.” Vale expects to reach a price settlement with the Chinese this year, Jose Carlos Martins, its ferrous minerals director, said Jan. 19. Japanese steelmakers may agree prices first, Mysteel’s Xu said. The failure of Chinese talks last year were followed by the arrest of four Rio executives in China in August on allegations of bribery and commercial secrets theft from the steel industry. Rio and Baosteel, China’s largest mill, both changed iron ore price negotiators this year, starting talks on a fresh slate. “People are optimistic there’ll be a contract agreement this year, and some believe it may be a quick deal,” Macquarie’s Hamilton said. “There is an incentive on the part of the big mills like Baosteel to negotiate a benchmark, because they like certainty.” — Thomas Biesheuvel , Firat Kayakiran and Brett Foley in London, Helen Yuan in Shanghai, Jesse Riseborough and Rebecca Keenan in Melbourne, Masumi Suga in Tokyo and Sungwoo Park in Seoul. Editors: Tan Hwee Ann , Simon Casey To contact the Bloomberg News staff on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net ; Helen Yuan in Shanghai at hyuan@bloomberg.net

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Real estate market likely to bottom out in Q2

January 24, 2010

The floor in the real estate market of the UAE is likely to come in the second quarter of this year. However, the entry of distressed assets and vulture funds is yet to materialise, according

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Real estate market likely to bottom out in Q2 (Zawya)

January 23, 2010

The floor in the real estate market of the UAE is likely to come in the second quarter of this year. However, the entry of distressed assets and vulture funds is yet to materialise, according to a new report.

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Ernst & Young Partners Jailed: Richard Shapiro, Brian Vaughn Sentenced To Prison

January 23, 2010

NEW YORK — Two ex-partners of the accounting firm Ernst & Young each have been sentenced in New York to more than 1 1/2 years in prison, the second set of former partners of the firm to be sentenced in as many days. Richard Shapiro and Brian Vaughn were sentenced Friday in federal court in Manhattan. Shapiro was sent to prison for two years and four months while Vaughn received a 1-year-and-8-months prison term. They were among four defendants convicted last May of conspiracy in the design, marketing and implementation of tax shelters sold by Ernst & Young. Two others were sentenced Thursday. The government said the tax shelters generated billions of dollars in paper tax losses that were used to offset actual income.

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China’s Growth Accelerates to Fastest Since 2007 as Bubble Risks Increase

January 20, 2010

By Bloomberg News Jan. 21 (Bloomberg) — China’s growth rate accelerated to the fastest pace since 2007 in the fourth quarter, signaling a need to rein in credit growth that threatens to destabilize the world’s fastest growing major economy. Gross domestic product rose 10.7 percent from the same period a year ago, more than the median forecast of 10.5 percent in a Bloomberg News survey , a statistics bureau report showed in Beijing today. For the full year, GDP gained 8.7 percent, beating Premier Wen Jiabao ’s 8 percent target. The report may stoke speculation the central bank will start raising its benchmark interest rate and tighten restrictions on the nation’s lenders. Minutes after the release, traders said the People’s Bank of China guided three-month bill yields higher at an auction for the second time in two weeks. “Policy makers have to weigh the need to curb inflation and the necessity of maintaining stimulus to ensure a smooth recovery,” Xing Ziqiang , an economist at China International Capital Corp. in Beijing, said before the release. “Tightening too early or too aggressively may lead to a drastic slowdown in the second half of this year.” Asian stocks fell immediately after the GDP release before recouping losses, with the MSCI Asia Pacific Index little changed at 124.17 as of 10:16 a.m. Hong Kong time. The Shanghai Composite Index rose 0.3 percent. Sales, Production Wen this week indicated that he’s putting more emphasis on monthly data than year-on-year figures exaggerated by the slowdown from late 2008. Government figures today also showed that retail sales gains quickened in December, while industrial production increased at a slower pace. The economy’s third straight quarterly acceleration highlights the risk that inflation may surge and asset bubbles form after monetary policy committee member Fan Gang said in November that growth of more than 10 percent is excessive. Consumer prices rose 1.9 percent in December from a year earlier, today’s data showed, after a 0.6 percent gain in November. Producer prices climbed 1.7 percent, after declining for the previous 12 months. Banking regulator Liu Mingkang confirmed yesterday that lending limits exist for some banks and said credit growth will slow this year. Drivers of Growth Fourth-quarter economic growth was driven by an unprecedented $586 billion stimulus package, subsidies for consumer purchases and a credit-fueled investment boom . The property market has rebounded and a 13-month slump in exports ended last month. Industrial production grew 18.5 percent in December from a year earlier and retail sales climbed 17.5 percent, the statistics bureau said today. Urban fixed-asset investment jumped 30.5 percent in 2009, the release showed. The world may again this year count on China as the biggest engine of growth, with the International Monetary Fund projecting it to expand 9 percent, compared with 1.3 percent for advanced economies. Mining company Rio Tinto Group reported a 49 percent jump in fourth-quarter iron ore output on China’s demand, while companies ranging from Ford Motor Co. and Volkswagen AG to Hong Kong billionaire Cheng Yu-tung’s New World Department Store China Ltd. are expanding in the nation. After last year overtaking the U.S. as the biggest auto market and Germany as the biggest exporter, China is poised to supplant Japan in 2010 as the second-biggest economy. According to Wen, policy makers’ key tasks this year include managing credit growth, controlling inflation and countering property speculation. Speculative Inflows Those objectives may be made more difficult by so-called hot money pouring into the nation from investors betting on the nation’s recovery and gains in the yuan, which has been held at about 6.83 per dollar since July 2008 to help exporters. As much as $30 billion a month of speculative capital may flow in during the first half of this year, according to Bank of America- Merrill Lynch. Liu, the banking regulator, said yesterday in Hong Kong that banks will extend 7.5 trillion yuan ($1.1 trillion) of loans this year, about 22 percent less than last year’s unprecedented 9.59 trillion yuan. The central bank this month ordered lenders to set aside a larger proportion of deposits as reserves and guided bill yields higher at auctions after 2010 began with a surge in lending. China’s 2009 GDP growth rate was down from 9.6 percent in the previous year. — Li Yanping , Kevin Hamlin , Jay Wang . Editors: Paul Panckhurst , Chris Anstey . 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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Housing Starts in U.S. Fall More Than Forecast; Building Permits Increase

January 20, 2010

By Bob Willis Jan. 20 (Bloomberg) — Housing starts in the U.S. fell more than anticipated in December, while building permits unexpectedly jumped, signaling inclement weather may have kept builders away from worksites. Work began on 557,000 houses at an annual rate, down 4 percent from November, figures from the Commerce Department showed today in Washington. Permits , a sign of future construction, climbed to the highest level in a year. The government’s extension and expansion of a tax credit for first-time buyers may help underpin demand in the first half of 2010, giving builders reason to ramp up new projects. The gain in permits, which are less influenced by weather, indicates an unseasonably cold and wet December probably prevented some work from getting started last month, according to economists like Patrick Newport. “When it’s cold and rainy you can’t pour concrete and lay foundations, but you can get a permit,” said Newport, an economist at IHS Global Insight in Lexington, Massachusetts, who forecast a drop in starts and increase in permits. “Overall, this is a really good report,” he said, adding the housing recovery “has legs.” A report from the Labor Department showed wholesale prices increased 0.2 percent after jumping 1.8 percent the prior month, showing the economy is recovering without the immediate threat of inflation. Excluding food and fuel, so-called core prices were unchanged. Stocks Down Stock-index futures held earlier losses following the reports, depressed by declines in banking shares after Bank of America Corp. reported its third loss in the past five quarters. The contract on the Standard & Poor’s 500 Index was down 0.6 percent to 1,138.4 at 8:51 a.m. in New York. Treasury securities rose. Starts were projected to fall to a 572,000 pace last month according to the median estimate of 72 economists surveyed by Bloomberg News. Projections ranged from 495,000 to 630,000. The government revised November’s reading up to a 580,000 from the 574,000 previously estimated. For all of 2009, builders broke ground on 553,800 houses, the fewest since records began in 1959. The annual rate was down 39 percent down from 2008’s 905,500, which was the second-lowest ever. The report showed building permits increased 11 percent to a 653,000 pace, the most since October 2008. Permits were forecast to fall to 580,000. Construction of single-family houses decreased 6.9 percent to a 456,000 rate. Multifamily Rises Work on multifamily homes, such as townhouses and apartment buildings, climbed 12 percent to an annual rate of 101,000. Three of four regions showed a decline in starts in December, led by a 19 percent drop in the Northeast. The South showed a 3.3 percent gain. There are still headwinds to a housing recovery. Rising foreclosures are adding to inventory and may discourage builders. A record 3 million U.S. homes will be repossessed by lenders this year as high unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast on Jan 14. Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005. President Barack Obama on Nov. 6 extended an $8,000 first- time buyer credit that was due to expire at the end of the month and expanded it to include current homeowners. The extension covers closings through June as long as contracts are signed by the end of April. Still, the measure may have pulled sales forward, depressing demand in the second half of the year. Sales Decrease Sales of new houses dropped 11 percent in November, the month the government’s tax credit was due to expire. A jump in purchases of existing homes pushed total sales up to a 6.895 million annual pace, the most since March 2007. Weather may have also played a role in depressing December housing starts, economists said. Last month was the 14th coldest December and 11th wettest in 115 years of record keeping, according to the National Climatic Data Center, in Asheville, North Carolina. Confidence among U.S. homebuilders unexpectedly dropped in January to the lowest level since June, the National Association of Home Builders/Wells Fargo said yesterday. Any sustained recovery will require gains in employment, economists said. The U.S. has lost 7.2 million jobs since the recession began, and economists surveyed by Bloomberg early this month forecast joblessness will average 10 percent this year. Builder Loss KB Home, the Los Angeles-based homebuilder that sells to first-time buyers, is among homebuilders struggling. The company last week reported a pretax loss of $91 million on declining revenue for the fiscal fourth quarter that ended Nov. 30. KB Home’s orders rose 12 percent to 1,446 from 1,296 in the year-earlier quarter, while completed sales dropped 22 percent to 3,042, according to the report. The average price declined 12 percent to $203,400. KB Home is “not going to make money in the first quarter” and plans to “restore profitability” in the second half of 2010, Chief Executive Officer Jeffrey Mezger said Jan. 12 in a conference call with analysts and investors. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

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

January 20, 2010

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

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Federer Struggles as Williams Eases Into Second Round of Australian Open

January 19, 2010

By Rob Gloster Jan. 19 (Bloomberg) — Top seeds Roger Federer and Serena Williams took contrasting paths into the second round of the Australian Open tennis tournament. Federer, a three-time champion at Melbourne Park, rallied to beat 37th-ranked Igor Andreev of Russia in four sets. Federer had to fight off three set points in the third set that would have left Andreev a set from winning the match. “I was lucky to get out of that one,” Switzerland’s Federer said in a televised courtside interview after his 4-6, 6-2, 7-6 (7-2), 6-0 victory. “It was a fortunate third set for me today.” Federer, who’s seeking a record-extending 16th major championship, dropped a set in his opening match of a Grand Slam tournament for the first time since the 2003 U.S. Open, when he lost the first set to Jose Acasuso . Defending women’s champion Williams, playing her first Grand Slam match since her outburst at the U.S. Open, eased past Urszula Radwanska 6-2, 6-1. The 28-year-old Williams, her right thigh wrapped in a bandage to protect her hamstring, improved her career mark to 41-0 in Grand Slam first-round matches with her win over Radwanska, 19, of Poland. “I’ve been having it strapped all week, all last week as well,” Williams said when asked about the bandage at a news conference. “So just keeping it up and making sure I’m able to keep moving as best as I can.” Seeking Repeat Williams, who also won the Australian Open in 2003, 2005 and 2007, is trying to become the first repeat women’s champion in Melbourne since Jennifer Capriati in 2002. Williams lost her last Grand Slam match, a semifinal at the U.S. Open, when she forfeited match point for lambasting a lineswoman who called her for a foot fault. The tirade led to a $175,000 fine. “The whole incident was a learning experience,” Williams said. Her sister, sixth-seeded Venus, defeated Lucie Safarova of the Czech Republic in straight sets to reach the second round of the Australian Open. The American won 6-2, 6-2. Other seeded women to advance on the second day of the season-opening major included No. 8 Jelena Jankovic of Serbia, No. 11 Marion Bartoli of France, No. 13 Samantha Stosur of Australia and No. 20 Ana Ivanovic of Serbia. No. 6 Nikolay Davydenko of Russia, No. 9 Fernando Verdasco of Spain, No. 10 Jo-Wilfried Tsonga of France and No. 12 Gael Monfils of France all advanced on the men’s side. Eighth-seeded Robin Soderling , last year’s French Open runner-up, became the highest men’s seed to go out, losing a five-set match. No. 16 Tommy Robredo of Spain and Sam Querrey , a 25th-seeded American, also were eliminated. Davydenko Challenge Davydenko won 6-1, 6-0, 6-3 over unseeded German Dieter Kindlmann and said he was ready to challenge Federer and second- seeded Rafael Nadal of Spain, who’ve won 14 of the last 16 Grand Slam titles. The 28-year-old Davydenko has won 10 straight matches, including the ATP World Tour Finals in London and a tournament in Doha. He defeated Federer and Nadal at each of those events. “I feel like I can beat everyone,” Davydenko told reporters. “Before now, mostly I was losing against these guys. But now I can beat everyone, it’s a good feeling.” To contact the reporter on this story: Rob Gloster in San Francisco at rgloster@bloomberg.net

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Indianapolis Colts, New Orleans Saints Advance in NFL Playoff Games

January 17, 2010

By Nancy Kercheval Jan. 17 (Bloomberg) — The Indianapolis Colts beat the Baltimore Ravens 20-3 and the New Orleans Saints defeated the Arizona Cardinals 45-14 to advance to the National Football League divisional championship games. The Colts will play the New York Jets or San Diego Chargers in the American Football Conference game and the Saints will host the winner of tomorrow’s Dallas Cowboys and Minnesota Vikings game in the National Football Conference contest Jan. 24. In Indianapolis last night, Peyton Manning completed 30 of 44 passing attempts for 246 yards, two touchdowns and one interception. His 10-yard pass to Austin Collie with two minutes left in the second quarter broke a 3-3 tie. With three seconds to go, he added another score on a three-yard pass to Reggie Wayne for a 17-3 halftime lead. “Their defense played well. It was a heck of a game by them,” said Ravens coach John Harbaugh in a televised interview. “We didn’t play well enough to win this game.” Kicker Matt Stover , who was released by the Ravens earlier in the season, added two field goals of 44 and 33 yards for the Colts (14-2) at Lucas Oil Stadium. Billy Cundiff kicked a 25-yard field goal for the only score for the Ravens (9-7). Saints Win Joe Flacco connected on 20 of 35 passing attempts for 189 yards and two interceptions. Baltimore lost two fumbles and was assessed 64 yards in penalties. At the Superdome in New Orleans, Drew Brees passed for 247 yards and three touchdowns for the Saints. “We played with a lot of energy,” said Saints coach Sean Payton in a televised interview. “It was important we came out early being physical.” Tim Hightower scored on a 70-yard run 20 seconds into the first quarter to give the Cardinals a 7-0 lead at the Superdome in New Orleans. The Saints, coming off three straight regular-season losses, countered with a one-yard run by Lynell Hamilton , a 17- yard pass from Brees to Jeremy Shockey and Reggie Bush ’s 46-yard rush to move ahead 21-7. Beanie Wells’s four-yard run brought the Cardinals (10-6) within seven points in the second quarter until Brees followed with a 44-yard pass to Devery Henderson and a two-yard toss to Marques Colston . Garrett Hartley kicked a 43-yard field goal in the third quarter, while Bush scored on an 83-yard punt return for the Saints (13-3). The final period was scoreless. Bush “really played well,” Brees said. “He showed a lot of dimensions.” Cardinals quarterback Kurt Warner , who missed a series of plays after he was hit in the chest during the second quarter, returned after halftime. He completed 17 of 25 passing attempts for 205 yards and one interception before Matt Leinart took command of the team, completing seven passes for 61 yards. The Saints are among five NFL teams who have never reached the Super Bowl. “There have been a lot of firsts since Sean Payton came here and we want to continue that,” Brees said. To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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New Orleans Saints Beat Arizona Cardinals 45-14 in NFL Divisional Playoff

January 16, 2010

By Nancy Kercheval Jan. 16 (Bloomberg) — Drew Brees passed for 247 yards and three touchdowns to lead the New Orleans Saints to a 45-14 win over the Arizona Cardinals in a National Football League divisional playoff game. The Saints will host the winner of tomorrow’s Dallas Cowboys and Minnesota Vikings game in the National Football Conference championship game. “We played with a lot of energy,” said Saints coach Sean Payton in a televised interview. “It was important we came out early being physical.” Tim Hightower scored on a 70-yard run 20 seconds into the first quarter to give the Cardinals a 7-0 lead at the Superdome in New Orleans. The Saints, coming off three straight regular-season losses, countered with a one-yard run by Lynell Hamilton , a 17- yard pass from Brees to Jeremy Shockey and Reggie Bush ’s 46-yard rush to move ahead 21-7. Beanie Wells’s four-yard run brought the Cardinals (10-6) within seven points in the second quarter until Brees followed with a 44-yard pass to Devery Henderson and a two-yard toss to Marques Colston . Garrett Hartley kicked a 43-yard field goal in the third quarter, while Bush scored on an 83-yard punt return for the Saints (13-3). The final period was scoreless. Bush “really played well,” Brees said. “He showed a lot of dimensions.” Cardinals quarterback Kurt Warner , who missed a series of plays after he was hit in the chest during the second quarter, returned after halftime. He completed 17 of 25 passing attempts for 205 yards and one interception before Matt Leinart took command of the team, completing seven passes for 61 yards. The Saints are among five NFL teams who have never reached the Super Bowl. “There have been a lot of firsts since Sean Payton came here and we want to continue that,” Brees said. To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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JPMorgan Falls on Drop in Fixed-Income Trading, Concern Over Loan Defaults

January 15, 2010

By Elizabeth Hester Jan. 15 (Bloomberg) — JPMorgan Chase & Co. , the second- largest U.S. bank, fell in New York trading after fixed-income trading revenue in the fourth quarter declined from the previous three months and the firm said it was “cautious” about the outlook for consumer loan defaults. The shares dropped $1.01, or 2.3 percent, to $43.68 at 4 p.m. in New York Stock Exchange composite trading. They gained 84 percent in the past year through yesterday. Lower volume and “tighter spreads” between bid and offer prices made the fixed-income business less profitable, the New York-based bank said today in a statement. Fixed-income markets revenue dropped to $2.7 billion from a record $5 billion in the third quarter. “Fixed-income trading weakness was worse than expected,” David Trone , an analyst at Macquarie Group, wrote in a note to investors today. The earnings were “low-quality,” Trone said. The results were a dark spot on the company’s earnings for the period, which more than quadrupled compared with the fourth- quarter of 2008. Chief Executive Officer Jamie Dimon called the performance “a little disappointing,” and said the bank was seeing a slight pick-up in client demand this month from December. The retail unit posted its first quarterly loss since the first quarter of 2008, and the company boosted reserves for consumer loans by $1.9 billion, bringing the total to $32.5 billion. ‘Modestly Disappointing’ “The results will likely be viewed as modestly disappointing on revenues and the cautious tone around the credit outlook,” John McDonald , a senior analyst at Sanford C. Bernstein, wrote in a note to investors today. Fourth-quarter net income climbed to $3.28 billion, or 74 cents a share, from $702 million, or 6 cents, in the same period a year earlier. Twenty-two analysts surveyed by Bloomberg estimated per-share earnings of 60 cents. Net revenue on a managed basis rose 32 percent to $25.2 billion from $19.1 billion. The bank said revenue climbed on higher principal transactions and investment-banking fees. JPMorgan set aside $549 million for investment bank compensation, down 80 percent from the third quarter. That brings full-year compensation costs at the investment bank, which more than doubled its revenue from 2008, to $9.33 billion. The figure was 21 percent below Macquarie Group analyst David Trone ’s estimate of $11.8 billion, and less than the $11 billion Ladenburg Thalmann analyst Brad Ball expected. Compensation Cost Results “included a sharp fall in fixed-income trading revenue, but offset by a low investment bank compensation cost,” Richard Staite , an analyst at Atlantic Equities, wrote in a note to investors. “We see the results as more positive for commercial and retail banks while raising concerns about the revenue outlook for investment banks.” Dimon, 53, has earned a profit in every quarter of the financial crisis, offsetting loan losses at consumer banking and credit cards with fee income. “While we are seeing some stability in delinquencies, consumer credit costs remain high and weak employment and home prices persist,” Dimon said in the statement. “Accordingly, we remain cautious.” JPMorgan is the first of the largest U.S. banks to report earnings. Goldman Sachs Group Inc. may say Jan. 21 that profit climbed to $3.36 billion after a loss of $2.29 billion in the previous year’s quarter, according to analysts’ estimates compiled by Bloomberg. Bank of America Citigroup Inc. may say Jan. 19 it lost $5.03 billion from repaying government bailout money, while Bank of America Corp., the biggest U.S. bank by assets, may say on Jan. 20 it earned $164 million. Wells Fargo & Co. is expected to earn $1.62 billion, its smallest profit in four quarters. JPMorgan’s investment bank rebounded from a loss in 2008’s fourth quarter to post net income of $1.9 billion. Results benefited from $181 million released from credit reserves during the period. The company was the No. 1 underwriter of stocks and bonds in the U.S. last year, and Dimon’s success in weathering the global credit contraction may help him restore the dividend to pre-crisis levels before his competitors. He said on a conference call with analysts that U.S. banks will probably have “too much” capital later this year because of new demands from regulators. Some companies will use the money to restore dividends, Dimon said. JPMorgan’s consumer bank posted a loss of $399 million as the firm set aside more money to cover credit losses. The unit’s retail-banking business had a $1 billion profit, more than offset by a $1.4 billion loss from consumer loans. Credit Cards Credit cards, a division Dimon has said is “doing really poorly,” narrowed its loss to $306 million from $371 million in the fourth quarter of 2008. The net charge-off rate fell to 9.33 percent from 10.3 percent in the third quarter and rose from 5.56 percent in the year-earlier period. Chief Financial Officer Michael Cavanagh said on a conference call with reporters that the bank “can’t say” it’s reached a peak yet in reserves. Dimon reiterated today that the credit-card unit will probably lose about $1 billion a quarter in the first half of 2010 before the company sets aside money to cover more losses. Credit-card defaults typically rise and fall with the U.S. jobless rate, which was 10 percent at the end of December. Losses were artificially low due to a payment holiday the bank implemented. Net income for the division could be reduced by as much as $750 million from legislative changes, the bank said previously. Tier 1 The Tier 1 capital ratio climbed to 11.1 percent from 10.2 percent in the third quarter. Income in the commercial-banking unit dropped to $224 million in quarter from $480 million as the bank boosted reserves for credit losses to $494 million from $190 million, reflecting “continued weakness in the credit environment, particularly real-estate-related segments,” the bank said. Cavanagh said demand for loans from mid-sized companies remains “light.” Losses for the second half of the year will depend on the economy and decisions about adding to loan-loss reserves, Dimon has said. The asset-management unit posted net income of $424 million, up from $255 million a year earlier. Treasury and Securities Services profit fell to $237 million from $533 million. To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net .

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Video: Matts Expects `Substantial’ JPMorgan Dividend Increases: Video

January 15, 2010

Jan. 15 (Bloomberg) — Mary Jane Matts, director of large-cap value strategies at Fifth Third Asset Management, talks with Bloomberg’s Margaret Brennan about JPMorgan Chase & Co.’s fourth-quarter profit reported today and business outlook. JPMorgan, the second-largest U.S. bank, said profit more than quadrupled on higher revenue from investment-banking fees. Net income climbed to $3.28 billion, or 74 cents a share, from $702 million, or 6 cents, in the same period a year earlier, the New York-based bank said today in a statement. (Source: Bloomberg)

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Video: Tyler Sees `Good Fundamental News’ in JPMorgan Earnings: Video

January 15, 2010

Jan. 15 (Bloomberg) — Jason Tyler, a senior vice president at Ariel Investments LLC, talks with Bloomberg’s Erik Schatzker and Deirdre Bolton about JPMorgan Chase & Co.’s fourth-quarter profit reported today. JPMorgan, the second-largest U.S. bank, said profit more than quadrupled on higher revenue from investment-banking fees. Net income climbed to $3.28 billion, or 74 cents a share, from $702 million, or 6 cents, in the same period a year earlier, the New York-based bank said today in a statement. (Source: Bloomberg)

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Video: Buik Says Obama Tax Levy to Make Life `Tough’ for Banks: Video

January 15, 2010

Jan. 15 (Bloomberg) — David Buik, an analyst at BGC Partners, talks with Bloomberg’s Scarlet Fu about the outlook for U.S. bank earnings amid a proposal by President Barack Obama to tax the biggest financial firms. JPMorgan Chase & Co., the second-largest U.S. bank by assets, said fourth-quarter earnings more than quadrupled, beating analysts’ estimates on higher revenue from investment-banking fees. Morgan Stanley, Goldman Sachs Group, Citigroup Inc. and Bank of America Corp. report next week. (Source: Bloomberg)

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