south-africa

Stocks, Oil Rally on Economic Optimism Treasuries Retreat

June 14, 2010

By Rita Nazareth and David Merritt June 14 (Bloomberg) — Stocks rose for a fifth day, the longest streak since October for the MSCI World Index, and commodities rallied as growth in European industrial production added to signs the global economic rebound is strengthening. The euro appreciated, the yen weakened and Treasuries fell. The MSCI World gauge of stocks in 24 developed nations gained 1.3 percent at 1:17 p.m. in New York, paring a rally of as much as 1.8 percent after Moody’s cut Greece’s credit rating. The Standard & Poor’s 500 Index, which is trading near its lowest valuation in 15 months compared with estimated earnings, increased 0.6 percent to 1,098.01 after surging as much as 1.3 percent. Copper advanced for a fifth day, headed for the longest rally in five months. Oil trimmed its advance to 1 percent. Ten- year Treasury yields increased 6 basis points to 3.29 percent and the euro strengthened to more than $1.22. Eighteen of 19 industries in the Stoxx Europe 600 Index rose after industrial production increased more than economists forecast in April, rising 0.8 percent for an 11th month of gains, the European Union said. The Federal Reserve may say on June 16 that output at U.S. factories, mines and utilities grew 0.9 percent last month after a 0.8 percent increase in April, according to economists surveyed by Bloomberg. “Stocks are so oversold it doesn’t take a whole lot to a get a rebound,” said E. William Stone , who oversees $104 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “The U.S. economic recovery is in place. In Europe, we got positive industrial production data. On a day lacking negative news, it won’t be that hard to get a positive move.” Rally Extended The S&P 500 climbed for a third day and added to gains from last week’s 2.5 percent rally, its best since March. A Thomson Reuters/University of Michigan report last week showed improving U.S. consumer sentiment. Apple Inc., maker of the iPhone and iPad, rallied 1.8 percent and Chevron Corp. climbed 1.3 percent to pace gains in technology and energy companies. JetBlue Airways Corp. jumped 6.3 percent and American Airlines parent AMR Corp. rallied 3 percent after Deutsche Bank AG advised buying the shares. The Dow Jones Transportation Average rose 1.8 percent today and is up 7.3 percent in 2010, compared with a 1.3 percent year-to-date drop in the Dow Jones Industrial Average. Some traders watch the performance of airlines, railroads and trucking companies to gauge the outlook for the overall economy. U.S. equities and commodities trimmed gains today as Moody’s Investors Service downgraded Greece’s government bond ratings by four levels to Ba1 from A3. The outlook is stable, Moody’s said. Earnings Estimates Analysts have raised their average 2010 earnings growth forecasts for the S&P 500 to 32 percent from 26 percent at the end of March, according to data compiled by Bloomberg. The improving forecasts came even as the benchmark measure of U.S. equities retreated 13 percent between April 23 and June 4 amid concern some European nations will struggle to finance deficits. The S&P 500 is trading at about 13.5 times analysts’ earnings estimates for the next 12 months, near the lowest level since March 2009, the month the benchmark index slumped to a 12- year low. “What we see is corporate profit growth in a very low- inflation, low-interest-rate environment,” David Bianco , head of U.S. equity strategy at Bank of America-Merrill Lynch, said in a Bloomberg Radio interview today with Tom Keene . “By year- end, we’ll be at 1,300” for the S&P 500. Interest Rate Watch Federal Reserve Bank of St. Louis President James Bullard , speaking in Tokyo today, said Europe’s debt crisis shouldn’t cause the Fed to postpone raising interest rates as the economy recovers. The central bank has kept its benchmark lending rate at a record-low range near zero since December 2008 to foster growth. The Stoxx Europe 600 Index rallied 1.2 percent, while the MSCI Asia Pacific Index climbed 1.6 percent to the highest in almost four weeks. BHP Billiton Ltd. and Rio Tinto Group climbed more than 2.4 percent in London. Axa SA, Europe’s second-biggest insurer, rose 3.7 percent in Paris after saying it’s in talks to sell part of its U.K. life insurance unit to Clive Cowdery ’s Resolution Ltd. for 2.75 billion pounds ($4 billion). BP Plc , struggling to contain its oil spill in the Gulf of Mexico, slipped 9.3 percent to a 13-year low of 355.45 pence in London. The company faces a U.S. deadline today for a plan to raise oil-containment capacity as President Barack Obama demands an escrow account for damages claims related to the worst environmental disaster in the nation’s history. Developing-nation stocks rose for a fifth day, the longest winning streak in two months, with the MSCI Emerging Markets Index gaining 1.7 percent. Benchmark gauges in Taiwan, South Africa, Thailand and Qatar advanced at least 1.2 percent. Won Rallies South Korea’s won strengthened 2 percent against the dollar after policy makers said they will give banks time to meet a new ceiling on forward contracts, holding off from imposing controls on capital flows. Copper futures for July delivery rose 7.5 cents, or 2.6 percent, to $2.979 a pound on the Comex in New York, poised for the fifth straight gain, the longest rally since early January. The metal climbed 3 percent last week. Crude oil futures for July delivery increased 1 percent to $74.54 a barrel on the New York Mercantile Exchange after jumping 3 percent earlier. The yield on the two-year Treasury note increased four basis points to 0.77 percent, and the 30-year bond yield rose seven basis points to 4.22 percent. German 10-year bunds fell, with the yield advancing seven basis points to 2.63 percent. Belgian Bonds The Belgian 10-year yield jumped 11 basis points to 3.46 percent. Flemish nationalists took the lead in Belgium ’s general elections, setting up coalition talks with French-speaking Socialists who face demands from Dutch-speaking voters to give more powers to the nation’s regions. The cost of protecting corporate bonds from default fell in the U.S. and Europe. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses or speculate on creditworthiness, declined 3 basis points to a mid-price of 122.4 basis points, according to Markit Group Ltd. In Europe, the Markit iTraxx Crossover Index of credit- default swaps on 50 mostly junk-rated companies fell 21 basis points to 575, the lowest in 1 1/2 weeks. The yen dropped 0.1 percent to 91.76 per dollar, and weakened 1.5 percent against the euro to 112.64. The euro strengthened 1.4 percent to $1.2276. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net

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Stocks, Commodities Advance on Outlook for Global Recovery Yen Declines

June 14, 2010

By Rita Nazareth and David Merritt June 14 (Bloomberg) — Stocks rose for a fifth day, the longest streak since October for the MSCI World Index, and commodities rallied on speculation government reports this week will show the global economic rebound is strengthening. The yen weakened and Treasuries fell. The MSCI World gauge of stocks in 24 developed nations gained 1.2 percent at 9:38 a.m. in New York and the Standard & Poor’s 500 Index increased 0.5 percent. Copper rallied for a fifth day in London, oil climbed 2.5 percent and sugar jumped for an eighth consecutive session. The yield on the 10-year Treasury note climbed six basis points to 3.3 percent and the yen weakened against all 16 of its most-traded counterparts. The MSCI World advanced above the highest closing level since May 19 after industrial production increased more than economists forecast in April, rising 0.8 percent for an 11th month of gains, the European Union said today. The Federal Reserve may say on June 16 that output at U.S. factories, mines and utilities grew 0.9 percent last month after a 0.8 percent increase in April, according to economists surveyed by Bloomberg. “Stocks are so oversold it doesn’t take a whole lot to a get a rebound,” said E. William Stone , who oversees $104 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “The U.S. economic recovery is in place. In Europe, we got positive industrial production data. On a day lacking negative news, it won’t be that hard to get a positive move.” Rally Extended The S&P 500 rose for a third day and added to gains from last week’s 2.5 percent rally, its best since March. A Thomson Reuters/University of Michigan report last week showed improving U.S. consumer sentiment. Alcoa Inc., the biggest U.S. aluminum producer, rose 1 percent and Exxon Mobil Corp. climbed 0.5 percent to pace an advance in commodity producers. Analysts have raised their average 2010 earnings growth forecasts for the S&P 500 to 32 percent from 26 percent at the end of March, according to data compiled by Bloomberg. The improving forecasts came even as the benchmark measure of U.S. equities retreated 13 percent between April 23 and June 4 amid concern some European nations will struggle to finance deficits. The S&P 500 is trading at about 13.4 times analysts’ earnings estimates for the next 12 months, near the lowest level since March 2009. “Fundamentals remain supportive for equities and equity volatility should revert to lower levels,” Nomura Holdings Inc.’s London-based strategist Ian Scott wrote in a note dated June 11. “The coming earnings announcement season should provide the catalyst for equity investors to focus on the value on offer and for equities to recover.” Fed Watch Federal Reserve Bank of St. Louis President James Bullard , speaking in Tokyo today, said Europe’s debt crisis shouldn’t cause the Fed to postpone raising interest rates as the economy recovers. The central bank has kept its benchmark lending rate at a record-low range near zero since December 2008 to foster growth. The Stoxx Europe 600 Index rallied 1 percent as 18 of 19 industry groups gained, while the MSCI Asia Pacific Index climbed 1.5 percent to the highest in almost four weeks. BHP Billiton Ltd. and Rio Tinto Group climbed more than 2.4 percent in London. Axa SA, Europe’s second-biggest insurer, rose 2.6 percent in Paris after saying it’s in talks to sell part of its U.K. life insurance unit to Clive Cowdery ’s Resolution Ltd. for 2.75 billion pounds ($4 billion). BP Slumps BP Plc , struggling to contain its oil spill in the Gulf of Mexico, slipped 6.5 percent in London. The company faces a U.S. deadline today for a plan to raise oil-containment capacity as President Barack Obama demands an escrow account for damages claims related to the worst environmental disaster in the nation’s history. Developing-nation stocks rose for a fifth day, the longest winning streak in two months, with the MSCI Emerging Markets Index gaining 1.7 percent. Benchmark gauges in Taiwan, South Africa, Thailand and Qatar advanced more than 1 percent. South Korea’s won strengthened 2 percent against the dollar, the best performer among 26 emerging-market currencies, after policy makers said they will give banks time to meet a new ceiling on forward contracts, holding off from imposing controls on capital flows Copper for delivery in three months gained 2.1 percent to $6,614.50 a metric ton on the London Metal Exchange. Prices have climbed for five days in a row, the longest advance since Jan. 4. Crude oil futures for July delivery increased $1.85 to $75.63 a barrel on the New York Mercantile Exchange. White, or refined, sugar for August delivery jumped as much as 0.7 percent to $527.40 a metric ton, the highest price since March, on the Liffe exchange in London. Prices have climbed for eight days, the longest advance since June 2008. Treasuries Drop The yield on the two-year Treasury note increased four basis points to 0.77 percent, and the 30-year bond yield rose eight basis points to 4.23 percent. German 10-year bunds fell, with the yield advancing seven basis points to 2.64 percent. The Belgian 10-year yield jumped 11 basis points to 3.47 percent. Flemish nationalists took the lead in Belgium ’s general elections, setting up coalition talks with French-speaking Socialists who face demands from Dutch-speaking voters to give more powers to the nation’s regions. The cost of protecting European corporate bonds from default fell, with the Markit iTraxx Crossover Index of credit- default swaps on 50 mostly junk-rated companies declining 21 basis points to 575, the lowest in 1 1/2 weeks, according to Markit Group Ltd. The yen dropped 0.2 percent to 91.79 per dollar, and weakened 1.3 percent against the euro to 112.45. The dollar depreciated 1.1 percent to $1.2238 versus the euro. The pound climbed 1.4 percent to $1.4748 and gained 0.2 percent to 83.1 pence per euro after the Office for Budget Responsibility said Britain’s deficit will be 22 billion pounds ($32 billion) lower than the Treasury had forecast for 2010-2015. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net

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Barclays Retains Commitment to Absa Even as Returns Decline, Varley Says

June 11, 2010

By Jon Menon and Renee Bonorchis June 11 (Bloomberg) — Barclays Plc Chief Executive Officer John Varley gave an “absolute” commitment to Absa Group Ltd. , five years after he led the $4.48 billion acquisition of the South African bank. “I’m giving you our strategic commitment to the country of South Africa and to our investment in South Africa and that commitment is absolute,” said Varley, 54, in an interview with Bloomberg News yesterday to mark the anniversary of the July 2005 purchase. “You don’t make an investment of this magnitude and take a short-term view.” The sum paid for 54 percent of Absa was almost three times greater than the U.K. bank spent on its $1.54 billion takeover of Lehman’s North American unit in September 2008. While the bank in 2005 said the South African deal was “key to the creation of long-term shareholder value,” the return on equity at Absa has declined to 15.5 percent in 2009 from 25.6 percent in 2005, according to company filings . “Everything’s not rosy,” said Absa’s Deputy Chief Executive Officer Louis von Zeuner in a separate interview in Johannesburg on June 7. “There are areas where we thought we would have made more progress,” including credit cards, wealth management and expansion into the rest of Africa, he said. Varley said it was “a bit unfair” to judge any bank “by its performance in a market with greater abnormality than anything we have seen in the last 100 years.” The market environment had been “brutal” and Absa has shown a “brisk” rate of profit growth. Many strategic aims had been achieved, including the performance of the credit card unit and that of Absa Capital, its investment banking unit, which was the leader in the South African capital markets, Varley said. To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

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World Cup Marks Climax of FIFA Chief Blatter’s $1.2 Billion African Gamble

June 10, 2010

By Tariq Panja June 11 (Bloomberg) — FIFA President Sepp Blatter’s 35 years with soccer’s governing body have included nine World Cups on five different continents. The event starting in South Africa today will define his career more than any other. Since visiting Ethiopia in 1976, a year after he got a job as a FIFA technical officer, Blatter talked about a World Cup in Africa. Now that it’s happening, the 74-year-old Swiss still isn’t ready to retire, rebuffing calls for him to step down. He said yesterday he hadn’t finished his “mission.” “This World Cup for him, it’s like a mother with a baby,” Walter Gagg , a 68-year-old aide who has known Blatter for four decades, said in an interview at FIFA’s headquarters near Zurich. “For him, this will be his legacy for all his life.” Blatter has made South Africa 2010 the pillar of his presidency with matches stretching from Nelspruit to Cape Town over the next month. The $1.2 billion that FIFA has spent on South Africa is more than for any World Cup in history. “He took a major risk,” said Danny Jordaan , head of the country’s World Cup organizing committee, in a telephone interview. “Should that experiment fail, of course he would have had to bear that cross.” Blatter hasn’t given his personal endorsement to any of the bids vying to host the World Cup in 2018 or 2022. Global Event As president of FIFA, the French acronym for Federation Internationale de Football Association , Blatter controls an organization that generated a record $1 billion of revenue last year, and holds the same amount in its reserves. Almost all the income is derived from selling commercial and broadcasting rights to the World Cup, sport’s most-watched event. A first World Cup in Africa was a theme Blatter repeated as he crossed the continent in a private jet provided by Qatari billionaire Mohamed Bin Hammam , Asia’s top soccer official, during his campaign to assume the top job at FIFA in 1998. After missing out on the 2006 World Cup to Germany by a single vote, South Africa was awarded this year’s event in 2004 after a proposal by Blatter to rotate the competition across different continents, starting with Africa. FIFA scrapped the plan once South Africa and then Brazil were chosen to host the next two editions. “If it works well, it will be the masterpiece of Blatter,” said Roland Zorn , a journalist with German daily Frankfurter Allgemeine Zeitung who’s followed FIFA since 1986. “If it’s a disaster, it will be the end of his presidency.” FIFA said Blatter’s schedule meant he was unable to be interviewed for this article. ‘My Mission’ Blatter said at a press briefing yesterday that he intended to stand for a fourth four-year presidential term if backed by enough of the 208 soccer associations that make up FIFA. He must seek re-election in 2011. He stood unopposed in 2007. “We shall work for the next generation, and when we say we work for the youth, that’s what we want to do,” Blatter said. “This is my mission. The congress next year will say ‘yes’ or ‘no,’ and somebody else will take it up or I will go on.” Bin Hammam said in February the time had come for a change of leadership at the top of the world game. Preparations for the 2010 competition haven’t always been smooth. Construction costs for new stadiums have overrun, while workers at several sites went on strike. Organizers also have had to allay security concerns. More than 5,700 incidents of serious crime are reported in South Africa each day, including 50 homicides, among the highest rates in the world. Wrong Venue Uli Hoeness , a World Cup winner with Germany in 1974, the last tournament before Blatter joined FIFA, said in February this year’s choice of host was “the biggest wrong decision.” Blatter has said it would have been “immoral” to ignore Africa’s claims to stage the tournament, arguing the world owed something to the continent after “taking so much.” The champions of the English, Italian and Spanish soccer leagues each had at least two Africans on their teams this season. “His vision was to go to Africa and then not end in North Africa but in black Africa,” said Horst Schmidt , chief executive officer of the 2006 World Cup and a consultant to the 2010 event. “He’s been emotionally involved in this World Cup from the beginning and his expectation was always to convince the world that Africa can be the right place.” FIFA sold the marketing and television rights to this year’s event for $3.2 billion, 30 percent more than it did for the 2006 tournament. Local organizers probably won’t approach the 150 million-euro profit the German hosts did, Schmidt said. Controversial Statements Blatter’s tenure has been punctuated with controversial comments, allegations of corruption, and bitter battles for the top FIFA job, first in 1998 and then in 2002. Blatter, whose salary isn’t disclosed, was cleared when 11 members of FIFA’s 24-member executive made a complaint to Swiss prosecutors in 2001. They accused him of financial mismanagement linked to the collapse of marketing partner ISL and buying votes, according to court papers. In 2004, Blatter said public interest in women’s soccer would grow if players started to wear “tighter shorts.” Four years later he provoked an angry response from Alex Ferguson when he likened the Manchester United manager’s refusal to allow star Cristiano Ronaldo to join Real Madrid to slavery. “From a position of great power, he has uttered so many ridiculous statements that he is in danger of seriously damaging his credibility,” Ferguson said at the time. The world of soccer has been enriched during Blatter’s 12 years as FIFA president. Rousing Ovation The organization’s affiliated national governing bodies and six confederations would share a $56 million bonus after record sales of $1 billion in 2009, Blatter said. He received a rousing ovation from delegates at FIFA’s 60th Congress in Johannesburg yesterday when he told them about the bonus payments. Blatter’s “Goal” program has $120 million in funding to distribute to poorer associations for playing fields, training centers and other infrastructure. African soccer will show its support for Blatter, said Jordaan, the World Cup organizer. “When it comes to 2011 we certainly will not forget his commitment, not only to our country but to our continent,” he said. To contact the reporter on this story: Tariq Panja in Johannesburg at tpanja@bloomberg.net

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Legally Binding Climate Deal Unlikely Untio 2011, UN’s Yvo De Boer Says

June 10, 2010

By Alex Morales June 10 (Bloomberg) — An international treaty to fight climate change is likely to take shape during United Nations talks in December and be completed a year later, the UN’s top climate official Yvo de Boer said. The main ingredients of the accord may be set at a two-week summit in November and December in Cancun, Mexico, he told reporters today in Bonn. Countries likely will give legal form to the deal in late 2011, said de Boer, who failed in his attempt to marshal more than 190 countries into completing a treaty at talks last December in Copenhagen. “We really should have got a deal in Copenhagen,” de Boer said today in the German city, where almost two weeks of negotiations are taking place. “We really should have given the world that clarity last year.” De Boer, who announced his resignation in February and will leave his post next month, cast his vote in a poll of climate talks participants run by the environmental group WWF to ask when a deal is likely to be reached. He ticked two boxes, for the Cancun meeting and for the subsequent summit in South Africa at the end of 2011. “Countries want to know what they’re signing up to before they sign it,” de Boer said. “In Cancun we can get a fully functioning architecture” that includes deforestation, climate aid, greenhouse gas cuts and the transfer between countries of green technologies, he said. “That functioning architecture will give countries enough confidence to say we want to turn this into a binding treaty. That will come in South Africa.” To contact the reporter on this story: Alex Morales in Bonn at amorales2@bloomberg.net .

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Stocks in U.S., Europe Rise, Metals Gain on Report China’s Exports Surged

June 9, 2010

By Claudia Carpenter June 9 (Bloomberg) — Stocks advanced in the U.S. and Europe while metals rallied after Reuters reported a surge in China’s exports. Government debt sales drove down German and U.K. bonds. The Standard & Poor’s 500 Index added 0.5 percent to 1,067.25 at 9:31 a.m. in New York, while the Stoxx Europe 600 Index gained 1.1 percent, snapping three days of losses. China’s Shanghai Composite Index climbed 2.8 percent, the most in more than two weeks. Copper and oil rose, and gold declined after jumping to a record yesterday. German notes fell after a 4.6 billion-euro ($5.5 billion) debt sale. China’s exports in May grew about 50 percent from a year earlier, Reuters said. Most advanced economies are experiencing a “subdued” recovery, and risks to the global economic outlook have “risen significantly,” International Monetary Fund Deputy Managing Director Naoyuki Shinohara said. A survey of Bloomberg customers showed 73 percent of participants expect Greece to default. Germany, Portugal, the U.K. and the U.S. are selling bonds today to cover burgeoning deficits. “China’s export numbers showing that global trade remains strong are helping lift market sentiment,” said Sebastian Paris-Horvitz , a Paris-based chief investment strategist at AXA Investment Managers. “However, it would be wrong to conclude that fears about sovereign debt is fading. Volatility is likely to remain high.” U.S. index futures, which earlier swung between gains and losses, are signaling the S&P 500 may advance for a second day. The Federal Reserve will release its Beige Book, a summary of commentary on economic conditions, later today. A report from the Commerce Department set for 10 a.m. in Washington may show inventories at U.S. wholesalers rose for a fourth month in April. Emerging Markets China led gains in emerging markets including Russia, South Africa and the Czech Republic. The Micex Index rose 1.3 percent in Moscow, and the gauge for shares in Johannesburg added 1.5 percent. The Czech PX index advanced 1.1 percent after a report showed the economy returned to growth at the start of the year after shrinking for four quarters. Copper for delivery in three months climbed 2.8 percent to $6,335 a metric ton on the London Metal Exchange, and gold for immediate delivery fell 1 percent to $1,232.13 an ounce, and down from a record $1,252.11 yesterday. Oil advanced for a second day as an industry report showed the biggest weekly decline in U.S. crude stockpiles in six months. A government report today will probably also show stockpiles dropped, according to a Bloomberg News survey of 15 analysts. Crude for July delivery gained as much as $1.25, or 1.7 percent, to $73.24 a barrel in New York. Germany’s benchmark 10-year bund yield rose 4 basis points to 2.55 percent. Countries are selling record amounts of debt this year after funding stimulus programs to boost their economies during last year’s recession. The 10-year gilt yield climbed 4 basis points to 3.51 percent as Britain sold 3.75 billion pounds ($5.4 billion) of 2020 securities. The U.S. is issuing $21 billion of 10-year notes, and Portugal auctioned 1.52 billion euros of debt due in 2013 and 2020. To contact the reporter for this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net .

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Israel Rejects Demands for International Probe of Gaza Aid Flotilla Raid

June 6, 2010

By Gwen Ackerman and Jonathan Ferziger June 6 (Bloomberg) — Israel turned down demands for an international probe of its raid on a ship bringing aid to the Gaza Strip, which left nine dead, saying it would launch its own investigation. “We are rejecting the idea of an international commission,” Michael Oren , the Israeli ambassador to the U.S. said, speaking on “Fox News Sunday. “We are discussing with the Obama administration the way in which our inquiry will take place.” Calls for an international investigation began after nine Turkish citizens were killed when Israeli commandos raided their boat, one of six in a flotilla attempting to breach Israel’s three-year blockade on Hamas-controlled Gaza. The raid sparked calls for a lifting of the blockade, which Israel says is necessary to prevent weapons from reaching the area. Israeli Foreign Minister Avigdor Lieberman said any probe of the May 31 raid must be conducted by Israelis though it may include international observers. “It has to be an Israeli committee,” Lieberman said on Army Radio. “There is no problem with high level, well known international observers serving as partners in the process.” UN Secretary General Ban Ki-Moon discussed yesterday with Turkish Prime Minister Recep Tayyip Erdogan and Israeli Prime Minister Benjamin Netanyahu “options for moving forward with the investigation,” a statement on the UN Web site said. Proposed Commission That proposed commission would have members from Turkey and Israel as well as others appointed by the UN and would be headed by former New Zealand Prime Minister Geoffrey Palmer, an aide to Erdogan said in a telephone interview from the western city of Bursa, speaking on the usual condition of anonymity. Palmer didn’t reply to a voicemail message left on his cellphone in New Zealand today. “Israel has the ability and the right to investigate itself, not to be investigated by any international board,” Oren said. “I don’t think the United States would want an international inquiry into its military activities in Afghanistan, for example.” The U.S. has declined to specifically criticize Israeli actions. It backed a June 1 UN Security Council resolution that condemned the violence that led to the deaths of the aid activists, and called for an impartial inquiry. Turkey, which along with South Africa withdrew its ambassador from Israel over the incident, says an Israeli investigation wouldn’t meet that criterion. Israeli State Comptroller Micha Lindenstrauss will participate tomorrow in a parliamentary committee discussion on the government’s performance. ‘Decision-making Process’ “There is a real need to examine ourselves and the quality of the decision-making process before and after the operation,” said Yoel Hasson, the head of the state comptroller committee in parliament. Criticism within Israel of the flotilla operation has focused largely on the execution of the raid and not the blockade. A survey of Israeli Jews published in the Maariv daily on June 2 showed 94.8 percent agreeing that it was necessary to stop the boats, with 62.7 percent saying it should have been handled in a different manner. Only 8.1 percent thought Netanyahu should resign. The pollsters interviewed a representative sample of 400 Israeli Jews and the results had a 4.9 percent margin of error. Israel’s benchmark stock TA-25 stock index fell 1.9 percent in Tel Aviv at the close. Israel has said it issued numerous warnings to the Gaza- bound flotilla asking it to change course for the port of Ashdod and unload there, before it seized the vessels. Separate Boat The other five vessels, as well as a separate boat that arrived yesterday, were taken over peacefully. The raid on the flotilla, and the deaths of the activists, has focused world attention on the blockade of Gaza. “The time has come to lift the closure and find an appropriate alternative,” Israeli Welfare and Social Services Minister Isaac Herzog , a member of the Labor Party, said on Army Radio. US Secretary of State Hillary Clinton has said the situation in Gaza is “unsustainable” and top Israeli ministers met June 3 to discuss ways to change how the blockade on Gaza is implemented, a senior Israeli official said, speaking on condition of anonymity. The European Union, Russia and Turkey have called on Israel to end the blockade. Israel has been blockading Gaza since Hamas ousted forces loyal to President Mahmoud Abbas ’s Fatah group and seized full control in 2007 after winning Palestinian parliamentary elections the previous year. Hamas is considered a terrorist organization by the U.S., the European Union and Israel. ‘Armed Conflict’ Israel says its blockade is legal because it is in “a state of armed conflict” with Hamas. Some countries, such as Turkey, dispute the legality of the blockade. Some 330 rockets have been fired from Gaza into Israel since the end of a 2008 Israeli military operation in the area, killing one foreign worker last March, the Israeli army said. Israel says it launched the 2008 operation to stop the firing of rockets into its territory. More than 1,000 Palestinians and 13 Israelis were killed in the conflict. Israel expelled seven passengers and crew from the 19 aboard the aid ship intercepted this weekend and expects to send home at least another seven before midnight, said Sabine Haddad, an Interior Ministry spokeswoman. She said five Irish activists would leave either tonight or tomorrow. Another Flotilla The Free Gaza movement, which organized the flotilla in the May 31 confrontation and yesterday’s attempt by the MV Rachel Corrie to breach the blockade said they are planning another flotilla in two months. The Rachel Corrie was named after an American activist killed by an Israeli bulldozer while protesting home demolitions in the Gaza Strip in 2003. “We are getting a huge amount of donations, about 2,000 euros a day,” said spokeswoman Audrey Bomse. “We will have no problem getting ships.” Israel says that on May 31 its soldiers were attacked with knives and clubs and seven were wounded, including by gunfire after people aboard the ship managed to grab Israeli firearms. Activists have said they threw the firearms into the sea and that the Israelis instigated the violence. A Turkish autopsy found that several of those killed were shot multiple times and from the back at close range, the U.K.’s Guardian newspaper reported yesterday, citing Yalcin Buyuk, vice chairman of the council of forensic medicine. Bloodied Commandos Turkey’s Hurriyet newspaper today published photos showing what it said were bloodied Israeli commandos, and activists standing at a door with what appeared to be iron bars. Palestinians say the restrictions on food imports and construction materials have created a humanitarian crisis. Israel says it restricts imports because building materials and even some foods can be used to build rockets, bunkers or bombs. Hamas’s charter calls for the destruction of the Jewish state. Hamas leaders say they will renounce violence when Israel withdraws from territory occupied in 1967 and allows Palestinians to return to areas in Israel from which they fled in 1948. To contact the reporters on this story: Calev Ben-David in Jerusalem at Cbendavid@bloomberg.net ; Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net ;

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Israeli Ministers Oppose International Probe of Gaza Flotilla Raid Deaths

June 6, 2010

By Gwen Ackerman and Jonathan Ferziger June 6 (Bloomberg) — Two Israeli ministers said they opposed an international inquiry into the deadly naval raid on a Gaza Strip-bound aid flotilla as the United Nations discussed options for such a commission. “There shouldn’t be an international inquiry,” Finance Minister Yuval Steinitz said today. “If an inquiry is required it should be handled by parliament’s Foreign Affairs and Defense Committee.” Minister of Science and Technology Daniel Hershkowitz agreed and said he wouldn’t trust a probe that included Turkey. Calls for an international investigation began after nine Turkish citizens were killed when Israeli commandos raided their boat, one of six in a flotilla attempting to breach Israel’s three-year blockade on Hamas-controlled Gaza. The raid sparked calls for a lifting of the blockade, which Israel says is necessary to prevent weapons from reaching the area. UN Secretary General Ban Ki-Moon discussed yesterday with Turkish Prime Minister Recep Tayyip Erdogan and Israeli Prime Minister Benjamin Netanyahu “options for moving forward with the investigation,” a statement on the UN Web site said. The proposed commission would have members from Turkey and Israel as well as others appointed by the UN and would be headed by former New Zealand Prime Minister Geoffrey Palmer, an aide to Erdogan said in a telephone interview from the western city of Bursa, speaking on the usual condition of anonymity. Palmer didn’t reply to a voicemail message left on his cellphone in New Zealand today. Israeli State Comptroller Micha Lindenstrauss will participate tomorrow in a parliamentary committee discussion on the government’s performance. ‘Decision-making Process’ “There is a real need to examine ourselves and the quality of the decision-making process before and after the operation,” said Yoel Hasson, the head of the state comptroller committee in the Knesset. Criticism within Israel of the flotilla operation has focused largely on the execution of the raid and not the blockade. A survey of Israeli Jews published in the Maariv daily on June 2 showed 94.8 percent agreeing that it was necessary to stop the boats, with 62.7 percent saying it should have been handled in a different manner. Only 8.1 percent thought Netanyahu should resign. The newspaper didn’t say how many people were surveyed or give a margin of error. Israel’s benchmark stock index, the TA-25 Index, fell 1.8 percent at 3 p.m. in Tel Aviv. The U.S. has declined to specifically criticize Israeli actions. It backed a June 1 UN Security Council resolution that condemned the violence that led to the deaths of the aid activists, and called for an impartial inquiry. Turkey, which along with South Africa withdrew its ambassador from Israel over the incident, says an Israeli investigation wouldn’t meet that criterion. Numerous Warnings Israel has said it issued numerous warnings to the Gaza- bound flotilla asking it to change course for the port of Ashdod and unload there, before it seized the vessels. The other five vessels, as well as a separate boat that arrived yesterday, were commandeered peacefully. The raid on the flotilla, and the deaths of the activists, has focussed world attention on the blockade of Gaza. “The time has come to lift the closure and find an appropriate alternative,” Welfare and Social Services Minister Isaac Herzog , a member of the Labor Party, said on Army Radio. US Secretary of State Hillary Clinton has said the situation in Gaza is “unsustainable” and top Israeli ministers met June 3 to discuss ways to change how the blockade on Gaza is implemented, a senior Israeli official said, speaking on condition of anonymity. Blockade End The European Union, Russia and Turkey have called on Israel to end the blockade. Israel has been blockading Gaza since Hamas ousted forces loyal to President Mahmoud Abbas ’s Fatah group and seized full control in 2007 after winning Palestinian parliamentary elections the previous year. Hamas is considered a terrorist organization by the U.S., the European Union and Israel. Israel says its blockade is legal because it is in “a state of armed conflict” with Hamas. Some countries, such as Turkey, dispute the legality of the blockade. Some 330 rockets have been fired from Gaza into Israel since the end of a 2008 Israeli military operation in the area, killing one foreign worker last March, the Israeli army said. Israel says it launched the 2008 operation to stop the firing of rockets into its territory. More than 1,000 Palestinians and 13 Israelis were killed in the conflict. Activist Expulsions Israel will expel today all 19 passengers and crew from the aid ship intercepted this weekend. “They should all be gone by tonight,” said Sabine Haddad, an Interior Ministry spokeswoman. The Free Gaza movement, which organized the flotilla in the May 31 confrontation and yesterday’s attempt by the MV Rachel Corrie the breach the blockade said they are planning another flotilla in two months. The Rachel Corrie was named after an American activist killed by an Israeli bulldozer while protesting home demolitions in the Gaza Strip in 2003. “We are getting a huge amount of donations, about 2,000 euros a day,” said spokeswoman Audrey Bomse. “We will have no problem getting ships.” Israel says that on May 31 its soldiers were attacked with knives and clubs and seven were wounded, including by gunfire after volunteers aboard the ship managed to grab Israeli firearms. Activists have said they threw the firearms into the sea and that the Israelis instigated the violence. Multiple Times A Turkish autopsy found that several of those killed were shot multiple times and from the back at close range, the U.K.’s Guardian newspaper reported yesterday, citing Yalcin Buyuk, vice chairman of the council of forensic medicine. Turkey’s Hurriyet newspaper today published photos showing what it said were bloodied Israeli commandos, and activists standing at a door with what appeared to be iron bars. Palestinians say the restrictions on food imports and construction materials have created a humanitarian crisis. Israel says it restricts imports because building materials and even some foods can be used to build rockets, bunkers or bombs. Hamas’s charter calls for the destruction of the Jewish state. Hamas leaders say they will renounce violence when Israel withdraws from territory occupied in 1967 and allows Palestinians to return to areas in Israel from which they fled in 1948. To contact the reporters on this story: Calev Ben-David in Jerusalem at Cbendavid@bloomberg.net ; Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net ;

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Israel Seizes Gaza-Bound Aid Ship Organizers Say Boarded Without Violence

June 5, 2010

By Calev Ben-David and Gwen Ackerman June 5 (Bloomberg) — Israeli naval vessels seized an aid ship heading for the Gaza Strip with no violence, according to an army spokesman and the organizer of the boat. The MV Rachel Corrie was boarded by the Israeli navy in a peaceful takeover in international waters and is being taken to Israel’s Ashdod port, Free Gaza Movement spokeswoman Mary Hughes said in a phone interview. The crew put up no resistance, the army spokesman said, speaking anonymously according to regulation. The seizure caps a week of heightened tensions after the deaths of nine Turks during the boarding of a Gaza supply ship in international waters on May 31. Turkey and several European states have criticized Israel for its naval blockade of Gaza. The Jewish state is considering easing restrictions on the flow of aid into Gaza, Israel’s Channel Two television has reported. “We’re open to any suggestions,” Michael Oren , the Israeli ambassador to the U.S., said in an interview with Bloomberg Television’s “Political Capital with Al Hunt ,” airing this weekend. “We, too, are not happy with the status quo.” The Free Gaza movement, which organized the flotilla in the confrontation on May 31 and the MV Rachel Corrie — named after an American activist killed by an Israeli bulldozer while protesting home demolitions in the Gaza Strip in 2003 — rejected Israel’s proposal that the ship off-load its cargo at Ashdod port for transport to Gaza after security checks. It said Israeli restrictions are causing a humanitarian crisis in Gaza. Israel says the blockade is meant to prevent the smuggling of rockets and weapons into Hamas-ruled Gaza and insists the Palestinian coastal enclave is receiving sufficient aid. International Monitors Top Israeli ministers met June 3 to review the blockade policy and explore ways of changing its implementation after this week’s deadly naval raid, an Israeli official said, speaking on condition of anonymity because he wasn’t authorized to speak to the press on the matter. One possibility is the use of international monitors at Ashdod, Israel’s Channel Two news said without citing anyone. Israel says it attempted to prevent clashes with the aid flotilla earlier this week by issuing numerous warnings beforehand to change course for Ashdod and unload there. Israel has said that in its confrontation with the Gaza flotilla on May 31 its soldiers were attacked with knives and clubs after boarding the Mavi Marmara, one of the six vessels in the flotilla, and seven were wounded, including by gunfire after volunteers aboard the ship managed to grab Israeli firearms. Activists have said they threw the firearms into the sea. There was no violence on the other five ships. Turkish Autopsy A Turkish autopsy found that several of those killed were shot multiple times and from the back at close range, the U.K.’s Guardian newspaper reported today, citing Yalcin Buyuk, vice chairman of the council of forensic medicine. Criticism within Israel on the flotilla operation has focused largely on the execution of the raid and not the blockade. A survey of Israeli Jews published in the Maariv daily on June 2 showed 94.8 percent agreeing that it was necessary to stop the boats, with 62.7 percent saying it should have been handled in a different manner. Only 8.1 percent thought Prime Minister Benjamin Netanyahu should resign. The newspaper didn’t say how many people were surveyed or give a margin of error. Israel has faced global criticism over the raid and calls for an international investigation. The U.S. has declined to specifically criticize Israeli actions. It backed a United Nations Security Council resolution on June 1 that condemned the violence that led to the deaths of the aid activists, and called for an impartial inquiry. Diplomatic Protest Turkey, which along with South Africa withdrew its ambassador from Israel over the incident, says an Israeli investigation wouldn’t meet that criteria. Israel has been blockading Gaza since Hamas ousted forces loyal to President Mahmoud Abbas ’s Fatah group and seized control in 2007, after winning Palestinian parliamentary elections the previous year. Hamas is considered a terrorist organization by Israel, the U.S. and the European Union. A rocket fired from the Gaza Strip struck an open area in southern Israel this morning and no injuries were reported, an Israeli Army said. Israel launched an operation in the Gaza Strip in December 2008 that it said was meant to stop the firing of rockets into its territory. More than 1,000 Palestinians and 13 Israelis were killed in the conflict. Since the end of the three-week operation, some 330 rockets have been fired from Gaza into Israel, killing one foreign worker last March, the Israeli army said. Palestinians, backed by the UN and human-rights groups, say the restrictions on food imports and construction materials have created a humanitarian crisis. Israel says it blocks building materials because they can be used by Hamas to build rockets and bunkers. To contact the reporters on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net ; Calev Ben-David in Jerusalem at Cbendavid@bloomberg.net .

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Trichet Pushes Fiscal Tightening at G-20 as Geithner Wants Demand Growth

June 5, 2010

By Mark Deen and Timothy R. Homan June 5 (Bloomberg) — European Central Bank President Jean- Claude Trichet said tightening fiscal policy is the best way for Europe to help the global economy as U.S. Treasury Secretary Timothy F. Geithner urged it to buttress weak demand. The impact of narrower budget gaps “on growth could not be considered negative because it would improve confidence,” Trichet told reporters today after meeting with Group of 20 finance chiefs in Busan, South Korea. The need for such action is clear in “old industrialized economies,” he said. The remarks underline determination within the 16-nation euro area to shrink budget deficits in the wake of a sovereign debt crisis that has led to a 750 billion-euro ($913 billion) rescue fund for the region’s weakest members. The emphasis contrasts with the message delivered to the G-20 by the U.S., which wants countries with trade surpluses, including China and Germany, to stoke demand to help sustain the global recovery. “Stronger domestic demand growth in Japan and in the European surplus countries” is needed, Geithner said at a separate press briefing in Busan. Spending in both areas is “relatively weak,” he said. Fiscal Horizon While Geithner echoed the view that fiscal consolidation is needed, he said it should be done over the “medium term.” European officials said today that budget tightening needs to come next year, and German Chancellor Angela Merkel said that growth can’t come at the price of high state budget deficits. International Monetary Fund estimates backed up Geithner’s concern. Managing Director Dominique Strauss-Kahn said at a press briefing today that efforts to cut budget deficits in rich countries could hurt growth over the next two years. Stimulus measures implemented in the last two years that haven’t expired yet should remain in place in advanced economies, he said. A study by the fund showed that fiscal consolidation, without market deregulations that would bolster domestic demand, could shave as much as 2.5 percentage points off global growth and cost 30 million jobs worldwide. “The world may end up in a period of sub-potential growth for two or three years,” Venkatraman Anantha-Nageswaran , who helps manage about $140 billion in assets as global chief investment officer at Bank Julius Baer & Co. in Singapore, said in an interview today. “Asia is too small to support export-led growth for both euro zone and the U.S.” G-20 Pledge G-20 finance ministers and central bank governors said in their joint statement today that “within their capacity, countries will expand domestic sources of growth.” Recent volatility in financial markets shows “significant challenges” remain for the global economy, and policy makers stand ready to “safeguard” the recovery and job growth, the statement said. Concerns about the ability of Greece, Spain and Portugal to repay public debts have pushed down the value of the euro, helping the region’s exporters. The single currency yesterday touched $1.1956, its lowest level since 2006, and has depreciated 16 percent since the year began. “Europe’s No. 1 priority” must be to implement its 750 billion-euro plan to contain the debt crisis, Geithner said today. He added that “people want to see” the program implemented as parliaments finish ratifying it in coming days. France’s Welcome Some European leaders say they see benefits to the euro plunge. “I see good news from the current euro-dollar rate,” French Prime Minister Francois Fillon told reporters yesterday in Paris. President Nicolas Sarkozy “and I have been saying for years that the euro-dollar rate didn’t reflect reality and was penalizing our exports,” he said. In the U.S., the Obama administration is aiming to double exports during the next five years. Geithner warned that other countries can’t rely on the U.S. consumer to propel the global economy. Meantime, China’s government has kept in place a currency peg to the dollar adopted in July 2008 to help its exporters after allowing the yuan to appreciate 21 percent over the previous three years. “Something has to be done on the currency,” Strauss-Kahn told reporters in Busan. “The IMF still believes that the renminbi is substantially undervalued,” he said, using another term for China’s currency. Japan’s Recovery Japan’s economic recovery depended on trade for more than half of growth in the first quarter, when consumer spending slowed. At the same time, Bank of Japan Governor Masaaki Shirakawa today said at a press briefing that his country’s economic recovery is stronger than previously expected and there are bright signs for a pickup in domestic demand. U.S. indicators show little scope to propel global growth. The savings rate climbed to 3.6 percent in April, the highest level since January, from 3.1 percent in March as incomes increased and purchases cooled. Job growth was less than forecast in May, with a jobless rate of 9.7 percent. Bill Gross , co-chief investment officer and manager of the world’s biggest bond fund at Pacific Investment Management Co., said yesterday the unemployment rate may rise to 10 percent within the next several months with job growth “anemic.” “The market was assuming that the private sector was coming back, but obviously we’ve seen none of that,” Gross said in a radio interview on Bloomberg Surveillance with Tom Keene. Europe’s Banks Geithner also singled out Europe as a region needing to push forward with financial regulation reform. “Further progress on financial repair is critical to global economic recovery,” he wrote in a June 3 letter to G-20 counterparts. “This requires, particularly in parts of Europe, further efforts to restructure and recapitalize the banking system.” Bank of Italy Governor Mario Draghi , a member of the ECB’s governing council, countered Geithner’s assessment. Speaking at a press briefing today in Busan he said European banks are properly capitalized. The Busan meeting ended with no agreement on a universal bank levy and with finance chiefs pledging to work toward a November deal on increasing capital requirements for lenders. G-20 members, which account for about 85 percent of global output, include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., U.K. and EU. There’s been “a lot of heat,” in the G-20 talks, Shin Je- Yoon , deputy minister for international affairs at South Korea’s finance ministry, told reporters today, citing discussions of European fiscal consolidation and “structural policies” to bolster growth. To contact the reporters on this story: Mark Deen in Busan at markdeen@bloomberg.net ; Timothy R. Homan in Busan at thoman1@bloomberg.net

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G-20 Sees Bank Repair as Key to Economic Recovery, Seeks 2010 Agreement

June 5, 2010

By Mark Deen June 5 (Bloomberg) — Group of 20 finance chiefs will warn today that further repair of banks remains critical to the global economic recovery, according to an official from one of these nations, as they seek to agree on rules for lenders to build up capital and reduce risk-taking. The G-20 will reiterate a commitment to agree on new rules by the end of this year that would be phased in as the global economy recovers over two years, the official told reporters today in Busan, South Korea, on condition of anonymity. Finance ministers and central bankers from the G-20 conclude talks today amid concerns from euro-area officials and some bankers that haste in bolstering capital requirements would hurt economic growth. “Implementation is a variable,” Canadian Finance Minister Jim Flaherty , who is co-chair of this weekend’s meeting, told reporters in Busan yesterday. “I think that can be worked out over time. There could be a compromise over that.” At stake for banks is the potential need to raise as much as $375 billion in fresh capital under the proposals being discussed, according to estimates by UBS AG. Companies from Deutsche Bank AG to Bank of America Corp. warn that forcing them to build up reserves quickly could lead them to cut lending, threatening their profits and imperiling the global recovery. U.K. Chancellor of the Exchequer George Osborne , echoing U.S. Treasury Secretary Timothy F. Geithner , told reporters in Busan yesterday it was important to “end the uncertainty” facing financial markets by agreeing on a blueprint for reform this year even if its introduction may be postponed. Too Complicated “There’ll be a delay in the implementation,” French Finance Minister Christine Lagarde said. “We also need to do a lot of technical work on the quality of the rules. These subjects are too complicated to be rushed.” Both the U.S. and Europe are advocating regulatory models that build on their own existing rulebooks and so would give their banks a competitive edge if implemented globally. Nations such as the U.S. whose economies are largely financed by markets want banks to hold more assets on their balance sheets. Policy makers in continental Europe, where banks provide more financing, are concerned too-high reserves would choke growth. The G-20 today will say that while global growth has been faster than they expected, volatility in financial markets has highlighted challenges to the recovery, according to the official. The statement will address the need for fiscal consolidation in key advanced economies, while acknowledging the need to tailor exit strategies to individual circumstances. Deficit Reduction Lagarde told reporters yesterday that the majority of the group now views deficit reduction as the top priority, with a minority arguing that measures to support growth should take precedence. The officials gathered just as a slide in Hungary’s currency served as the latest reminder of investor angst over indebted governments. The forint fell to a 12-month low against the euro as the government warned of a “very grave situation.” China’s central bank Governor Zhou Xiaochuan told reporters yesterday that his nation is “confident” the European Union and the European Central Bank will be able to contain the risks from the region’s debt crisis. As they return to profit after governments spent $11 trillion aiding them through the credit crisis, banks are already warning regulators that forcing them to enhance capital levels could backfire if it hurts their ability to lend to customers and consumers. They want more time to be spent gauging the economic fallout from the new regulations. Impact on Lending “It is unrealistic to expect such significant capital raising to occur without a significant impact on lending, businesses and ultimately growth and employment,” Andrew Procter , Deutsche Bank’s global head of government and regulatory affairs, wrote in an April 16 letter to the Basel Committee on Banking Supervision, which is overseeing the rule- writing. JPMorgan Chase & Co. predicted in February that annual earnings at 13 of the largest banks would drop by $20 billion. G-20 officials also are trying to resolve divisions over a proposal backed by the U.S. and some European nations to impose a levy on banks to cover the cost of potential future bailouts. India’s Finance Minister Pranab Mukherjee said in an interview in Busan yesterday that using regulatory measures “instead of taxing the banking system is better.” Flaherty said he saw no “evidence” of a consensus for a bank tax. Ensuring Banks Pay As a compromise, the G-20 will state that there is a range of options to ensuring banks pay for bailouts, the official said. German Finance Minister Wolfgang Schaeuble said he’s confident the U.K. and “many others” will join Germany in introducing a European levy in the absence of a G-20 pact. “We will throw our weight behind European regulation and we won’t be alone in that,” Schaeuble said in an interview. Japan’s delegation refrained from publicly backing the proposal. “We have no intention to do something new for the time being,” Vice Finance Minister Naoki Minezaki said today. “Japan has already set up various systems,” including a deposit insurance system. “We should take positively that other countries set up such systems,” he said. Canada’s Flaherty supports a measure that would force banks to sell debt that could quickly be turned into capital. The G-20 accounts for about 85 percent of global gross domestic product. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., U.K. and EU. To contact the reporter on this story: Mark Deen in Busan at markdeen@bloomberg.net

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Euro Weakens Below $1.20 for First Time Since 2006 on Debt Crisis Concern

June 4, 2010

By Ben Levisohn and Catarina Saraiva June 5 (Bloomberg) — The euro tumbled for a second week against the dollar, falling to its lowest level in more than four years as concern that Europe’s debt crisis is spreading pushed investors to the safest currencies. Europe’s shared currency plunged below $1.20 for the first time since March 2006 and dropped for a sixth straight week versus the yen. The dollar and the yen climbed as a lower-than- forecast payrolls report yesterday fueled concern the U.S. economic recovery may be slowing, damping demand for growth- linked currencies. U.S. retail sales growth slowed to 0.2 percent in May, data next week may show. “There’s one driver of the market, and it’s called Europe,” said Marc Chandler , global head of currency strategy at Brown Brothers Harriman & Co. in New York. “Will budget cuts hurt European growth? Will Europe’s crisis hurt U.S. companies? Will contagion spread through the global financial system?” The euro dropped 2.5 percent to $1.1967 in New York, from $1.2273 on May 28. It touched $1.1956, the lowest level since March 2006. The 16-nation currency fell 1.6 percent to 109.98 yen, the biggest drop in three weeks, from 111.77. The dollar gained 0.9 percent to 91.90 yen, from 91.06 yen last week. Hungary is in a “grave situation” because the previous government “lied” about the economy, Peter Szijjarto , a spokesman for Prime Minister Viktor Orban , said yesterday. Hungary, whose forint tumbled 4 percent yesterday versus the dollar, needed a $24 billion bailout to avert default in 2008. Reminder of Greece “While Hungary is not the biggest economic power in the world, it reminds us so much of Greece,” said Dan Cook , senior market analyst at IG Markets Inc. in Chicago. “It creates a lot of concern, focused on the euro.” The cost to protect against default on Spanish government debt yesterday rose to a record 295.5 basis points, according to CMA DataVision prices. Credit-default swaps on Portugal were up 26 basis points to 364.8, and Italian swaps rose 30 basis points to a record high 264. The swaps pay a buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. U.S. payrolls added 431,000 jobs in May after a gain of 290,000 in April, the Labor Department said yesterday. Economists in a Bloomberg News survey forecast a gain of 536,000. Temporary census jobs accounted for 411,000 positions. ‘Disappointed the Market’ “It was a weak payrolls report that significantly disappointed the market,” said Aroop Chatterjee , a currency strategist at Barclays Plc in New York. “It calls into question the thesis that the U.S. will be a pillar of support for global growth.” U.S. retail sales rose 0.2 percent in May after gaining 0.4 percent in April, according to the median forecast in a Bloomberg survey of economists. The Commerce Department reports the data on June 11. Australia’s dollar dropped 1.9 percent to 75.67 yen and South Africa’s rand fell 1.1 percent to 11.80 yen on speculation the debt crisis will force traders to unwind carry trades, in which they borrow money in countries with low interest rates to invest in higher-yielding assets. Japan’s 0.1 percent benchmark makes the yen a popular choice for funding such transactions. Europe’s banks will have to write off 195 billion euros ($237 billion) of bad debts by 2011, the European Central Bank said on May 31. CNBC reported yesterday that Societe Generale SA was the subject of unconfirmed rumors of a derivatives loss. The bank declined to comment. It is telling analysts it didn’t suffer losses on derivatives, said two people familiar with the matter who declined to be identified. “There are tensions in European banks that are dragging down banking stocks,” said Jens Nordvig , a managing director of currency research in New York at Nomura Holdings Inc. “We’re in the middle of a structural asset allocation shift out of the euro.” G-20 Finance Chiefs Group of 20 finance chiefs meeting in Busan, South Korea, yesterday signaled they will delay introducing new rules aimed at forcing banks to raise the quality and quantity of capital they hold to buffer against financial crisis. Euro area officials voiced concern haste would hurt economic growth. The euro has fallen 9.2 percent this year versus its developed-world counterparts, Bloomberg Correlation-Weighted Indexes show. French Prime Minister Francois Fillon said yesterday he’s “not worried” about the current euro-dollar exchange rate. The rate “didn’t reflect reality and was penalizing our exports,” he told reporters in Paris. ‘Tried-and-True Method’ Europe wants “the currency to weaken to generate growth, increase tax revenues and inflate its way out of debt,” said Andrew Busch , a Chicago-based global currency strategist at Bank of Montreal. “It’s a tried-and-true method to deal with massive debt problems.” The yen fell for a second week versus the greenback after Japan’s parliament approved making Naoto Kan the nation’s next leader, replacing Yukio Hatoyama , who resigned. “Kan has a far more interventionist attitude regarding currencies and has expressed his view that a weaker yen is favorable,” strategists at BNP Paribas wrote in a note to clients yesterday. “The prospect of intervention to weaken the currency is increasing.” To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net ; Catarina Saraiva in New York at asaraiva5@bloomberg.net .

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Foster vs. Foster’s Wine Showdown Saddles Australia’s Goliath With Losses

June 3, 2010

By Robert Fenner June 4 (Bloomberg) — Adam Foster ’s annual wine production of 2,500 cases is a fraction of the sales by Foster’s Group Ltd. , the world’s second-largest producer. Yet it’s a factor in breaking up the rival he shares a name with. Foster’s Group , the Australian brewer that sells lager in 150 countries, spent A$7 billion ($5.9 billion) building its wine unit, acquiring such labels as Beringer of the Napa Valley. Wine earnings slumped 53 percent in the six months through December on a grape glut, currency moves and competition from thousands of smaller rivals unencumbered by shareholder and analyst expectations. After a decade, investors are left with billions of dollars worth of writedowns and a stock that has gained 18 percent since the start of 2001, or less than half the 40 percent rise in the benchmark S&P/ASX 200 index. Chief Executive Officer Ian Johnston said May 26 he plans to spin off the wine business. Foster’s Group “just don’t seem to know whether they are selling beer or wine, but my customers know what I do because I do it all myself,” said Adam Foster, 35, who started making wine in 2004 in a friend’s vineyard. “I do this for my lifestyle and that is what drives me, not trying to make a million cases or dollars a year.” He produces wine under the Syrahmi label as well as Foster e Rocco, a joint venture with Lincoln Riley, the sommelier at Gordon Ramsay ’s Maze restaurant in Melbourne. ‘Irrational Davids’ Australia has about 2,300 wine companies and is the world’s sixth-largest producer, according to the Australian Wine & Brandy Corp. Foster’s Group gets 32 percent of its A$4.7 billion of annual sales from outside Australia , New Zealand and Asia, most of which is in the wine unit. “There are lots of little irrational Davids in the wine industry and many of them are not in it for an economic return,” said Theo Maas , who holds shares of Foster’s Group among the A$5 billion of equities he helps manage at Arnhem Investment Management in Sydney. “Many are in it for lifestyle, which makes it hard if you are the goliath.” Currency moves sliced 13 percent off earnings in the six months ended December, compounding problems for Foster’s Group, which paid “too much” for wine assets and has struggled to increase prices in the face of rising production, Maas said. The company makes 36 million cases of wine a year, generating A$2.1 billion in sales. Foster’s Group shares have gained 1.6 percent this year. The stock has posted two annual gains since 2001. Aussie Dollar The company’s wine business may be worth as much as A$4 billion given its brands, vineyards and inventory, Morgan Stanley analyst Martin Yule said in a May 31 report. The Australian dollar has risen by 23 percent since the beginning of 2009. The gain helped slice earnings before interest and tax by A$83 million in the six months ended December. Foster’s Group made its first wine acquisition in 1996 with the A$482 million purchase of Mildara Blass Ltd. It paid A$2.7 billion for California’s Beringer Wine Estates Holdings Inc. in 2001, and its A$3.2 billion purchase of Southcorp Ltd. in 2005 cemented its ranking as the world’s second-biggest winemaker. Top-ranked Constellation Brands Inc. , based in Victor, New York, has taken more than $500 million in wine impairments and restructuring charges in the past two years. More Wine The Foster’s Group acquisitions coincided with growth in Australian wine production, which increased discounting. The nation’s output of table wine grew to 1.16 billion liters last year, compared with 1995’s 433 million liters, as growers were attracted to then-higher prices and tax deductions for vineyards. The Wine Grape Growers Australia , representing about 5,500 producers, estimates 17 percent of the nation’s capacity is “uneconomic.” “We have too much fruit,” Executive Director Mark McKenzie said. “This is rewarding consumers with low prices but locking in the industry into a discount mentality.” Analysts at Bank of America Merrill Lynch estimate Foster’s Group ’s beer unit is worth more than A$12 billion, higher than the company’s current market value of A$10.8 billion. “The reason wineries survive despite the lack of profitability is that a lot of people have other interests,” said Al Fencaros, a former industrial chemist who established Allinda Winery in the Yarra Valley northeast of Melbourne 20 years ago. Lindemans, Rosemount Foster’s Group has written down its wine assets, including its Lindemans and Rosemount brands, to about A$3.3 billion since completing the Southcorp deal, less than half of what it cost to create the business. Euromonitor International estimates Australia domestic wine demand at 463 million liters, less than half of production. Vintners must sell overseas, competing with products from South Africa and South America that are cheaper to make. Australia’s five largest producers account for 59 percent of the market, with none of the rest representing more than 1 percent, Euromonitor estimates. The top 10 Australian producers account for about 61 percent of the market, compared with 73 percent for their U.S. counterparts. Foster’s Group , which makes Meridian and Stag’s Leap, has 5.2 percent of the U.S. market, ranking it behind E&J Gallo, the Wine Group Inc. and Constellation Brands, according to Euromonitor, which estimates the U.S. wine market to be worth about $35 billion, compared with A$7.9 billion for Australia. Rising output in North America, South America and Europe has hurt Foster’s profitability. For every dollar of sales, the company earned 9.8 cents before interest and tax in its first half. Five years earlier, before acquiring Southcorp, it earned 21.3 cents. Making and selling wine are better suited to artisans instead of corporations, said Martin Joy , a Melbourne lawyer whose family vineyard Pyren makes 3,000 cases a year, including A$28 a bottle Block E shiraz. “The margins are so slim that you need to be in the wine game for other reasons,” Joy said. “You do become irrationally attached to the land.” To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net

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Kiwi Favorite of Speculators With Bollard Under Pressure to Increase Rates

June 2, 2010

By Candice Zachariahs and Wes Goodman June 3 (Bloomberg) — Reserve Bank of New Zealand Governor Alan Bollard ’s desire for a weaker currency is running into resistance from some of the world’s biggest bond investors. Kokusai Asset Management Co. and Loomis Sayles & Co. expect Chinese demand for New Zealand’s milk and wool to spur economic growth, leading Bollard to raise interest rates from a record low and helping the so-called kiwi rebound from its steepest drop in a year. Derivatives indicate borrowing costs will rise at least 1.5 percentage points within 12 months, about half a percentage point more than any other Group of 10 nation. “New Zealand will benefit from the Chinese recovery,” said Masataka Horii , who helps oversee the equivalent of $54.5 billion including Asia’s biggest bond fund at Kokusai in Tokyo. “Their economy is getting better. Overseas bondholders will be able to profit from currency appreciation.” A stronger kiwi may be the last thing Bollard wants as he tries to steer the nation’s $131 billion economy while a spreading debt crisis in Europe threatens to slow global economic growth. New Zealand’s dollar has climbed 33 percent against its U.S. counterpart from last year’s low in March, 38 percent versus the euro and 23 percent relative to the yen. “A gradual depreciation of the New Zealand dollar remains desirable for a sustainable rebalancing of the New Zealand economy, as it would boost export returns and discourage household spending on imports,” Bollard said in the central bank’s Financial Stability Report on May 19. Average daily trades in New Zealand’s currency amount to about 43 percent of the nation’s gross domestic product, according to Bloomberg calculations using the most recent data from the Bank of International Settlements. That’s the biggest proportion among the 16 most-traded currencies, just above the level for the Swiss franc. Trade Surplus Bollard may not be able to avoid increasing rates, which would boost demand for the currency, following a surge in commodities and government data on May 27 showing the first annual trade surplus since 2002. ANZ National Bank Ltd.’s index of New Zealand commodity export prices climbed to a record in May, led by surging dairy costs. Exports including milk products, wool and lumber account for 30 percent of New Zealand’s economy. Chinese purchases of the nation’s goods climbed almost 40 percent this year, more than from Australia, Japan, the U.S. or Germany, data from Beijing’s Customs General Administration show. The world’s fastest-growing major economy is New Zealand’s second-largest export market after Australia and the biggest importer of its dairy products. Rate-Rise Bets Interest-rate swaps indicate a 78 percent chance Bollard will lift the official cash rate at the Reserve Bank’s next meeting on June 10 from the current 2.5 percent level. The likelihood was 52 percent on May 21, according to a Credit Suisse Group AG index based on swaps. Analysts last month lowered year-end estimates for eight of the G-10 currencies and repeated a call for the yen to weaken, according medians in Bloomberg surveys. Of the 10, they remained bullish on just the kiwi, named for the flightless bird on the dollar coin. New Zealand’s dollar will rise to 72 U.S. cents by Dec. 31 from 68.05 cents at the end of May, based on the median estimate of 31 strategists surveyed by Bloomberg. Analysts cut forecasts for the currencies of Australia, Canada and Norway, which investors often compare with New Zealand’s dollar because all four rely on commodities for growth. UBS AG and Citigroup Inc., the world’s second- and fourth- biggest currency traders, said commodity exports and yield differentials will boost demand for the kiwi. National Australia Bank Ltd., the second-best forecaster in 2009, expects the New Zealand dollar will gain to 73 U.S. cents by year-end. Loomis Sees Parity “We like the longer-term outlook for New Zealand very much relative to other countries and absolutely on its own,” said Dan Fuss , who is based in Boston and whose Loomis Sayles Bond Fund beat 95 percent of competitors in the past year. “And if we have a demonstrably higher interest rate on what we consider an appreciating currency, then we’re going to buy it. And every time it gets hit on the head, we’ll probably buy some more.” Loomis Sayles bought kiwi bonds this quarter, Fuss said. The nation’s trade with Asia and a government plan to balance the budget may propel the currency to parity with the greenback in coming years, he said. Demand for New Zealand’s financial assets pushed an index of bonds due in more than a year up 11 percent the past 12 months in U.S. dollar terms, second only to South Africa among 26 debt markets tracked by the Paris-based European Federation of Financial Analysts’ Societies. Fed on Hold The kiwi weakened 6.4 percent against the U.S. dollar and 8.9 percent versus the yen in May as Europe’s sovereign-debt woes led traders to reduce holdings of higher-yielding assets and buy dollar-denominated securities. Federal Reserve Bank of Chicago President Charles Evans indicated May 31 that the European debt crisis will prompt the U.S. central bank to delay raising interest rates. The International Monetary Fund said on May 26 that New Zealand dollar’s may be overvalued by between 10 percent and 25 percent and needs to fall to narrow the country’s current- account deficit. The shortfall shrank to NZ$5.47 billion ($3.7 billion) in the 12 months ended Dec. 31 from NZ$5.9 billion in the year ended Sept. 30. Investors may seek the relative safety of U.S. Treasuries in the weeks ahead, limiting the New Zealand dollar’s gains, said Hideo Shimomura , who helps oversee the equivalent of $55.4 billion at Mitsubishi UFJ Asset Management Co. in Tokyo. The firm is a unit of Japan’s biggest publicly traded bank. GDP Forecast “The currency will be dominated by the situation in Europe, even if they hike,” he said in reference to the central bank. “I’m not bullish.” Shimomura is keeping New Zealand bonds only in funds he manages whose investing guidelines require such holdings. He predicts the currency will fall to 65 cents by year-end. Kokusai’s Horii also said the currency may decline because of global turbulence, though he is sticking to his view that central bank rate increases later this year will push the kiwi higher. Kokusai has invested in the kiwi through its Asia Pacific Sovereign Open Fund since its opening in January 2009. The kiwi offered total returns of 40 percent since then against the U.S. dollar, the most among the Group of 10 currencies, according to data compiled by Bloomberg. Prime Minister John Key , the former head of foreign exchange at Merrill Lynch & Co., said the nation’s currency may fail to keep pace with gains in the higher-yielding Australian dollar. Carry Trade “The carry trade is there although one could make the case it is less attractive at the moment than Australia where interest rates are a full 2 percentage points higher,” Key, 48, said in an interview June 1. Finance Minister Bill English said the economy will expand 3.2 percent in the year ending March 31, 2011. That’s up from a December forecast of 2.4 percent amid rising commodity prices. “Our assumptions are conservative,” English said in Wellington on May 21. Fonterra Cooperative Group Ltd. in Auckland, the world’s largest dairy exporter, forecast May 25 that it would pay its 10,500 farmers 8.2 percent more for milk in 2011, spurred by “strong” demand from China, the rest of Asia, the Middle East and North Africa. The group accounts for about 40 percent of the global trade in butter, milk powder and cheese. Limited ‘Headroom’ Year-ahead inflation expectations are at 2.9 percent, the Reserve Bank said on May 25, citing a quarterly survey of 74 business managers. That’s up from 2.1 percent in the previous report. The central bank aims to keep annual inflation between 1 percent and 3 percent on average. Bollard, the central bank governor since 2002, has “very limited inflation headroom” and that makes it hard for him to keep the benchmark rate unchanged at this month’s meeting, said Sue Trinh , a senior currency strategist in Hong Kong at Royal Bank of Canada, Canada’s biggest lender. Bollard slashed rates from a record high 8.25 percent to an all-time low 2.5 percent over seven meetings beginning July 2008 as the U.S. subprime crisis sparked the worst global financial crisis since the 1930s. “Over the years, New Zealand financial management, in particular the central bank, has been outstanding,” Loomis’ Fuss said. An independent central bank “is a tremendous asset to a country and for investors. New Zealand’s got it,” he said. To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net ; Wes Goodman in Singapore at wgoodman@bloomberg.net

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Trichet Says Emerging Nations Are a Source of Strength for World Economy

May 30, 2010

By Gabi Thesing May 31 (Bloomberg) — European Central Bank President Jean- Claude Trichet said emerging nations have weathered the global recession better than advanced countries. Federal Reserve Chairman Ben S. Bernanke also said in prepared remarks to a Bank of Korea conference in Seoul today that “as emerging market economies become increasingly important in the global trading and financial systems, the world economy will depend even more on them to maintain strong domestic growth and economic and financial stability.” The International Monetary Fund said last month that emerging economies, including Brazil and Russia, will expand 6.3 percent this year, nearly triple the pace of growth in advanced nations. Europe this month had to save its single currency with a $1 trillion rescue package after Greece’s sovereign debt crisis threatened to spread. “Emerging countries have also been severely affected, but as a group remained a source of strength for the world economy,” Trichet said via video link to the Bank of Korea conference, according to the text of his speech published by the Frankfurt-based ECB. “It is therefore not surprising that the crisis has led to even better recognition of their increased economic importance and need for full integration into global governance.” Trichet also said that “the international community has identified the G-20 as the premier forum for international economic cooperation.” The Group of 20 accounts for about 85 percent of global gross domestic product. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union. Korea holds the presidency this year. The world economy will grow 4.2 percent this year, the Washington-based IMF predicted on April 21, after a 0.6 percent contraction in 2009. To contact the reporter on this story: Gabi Thesing in London at gthesing@bloombeg.net

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Rio Chief Says Australian Mining Tax Makes Government His `Silent Partner’

May 30, 2010

By Shani Raja May 30 (Bloomberg) — Tom Albanese , chief executive officer of Rio Tinto Group , said Australia’s plan to boost taxes on resources producers would make the government a “silent partner” in businesses such as itself. The proposal for a 40 percent super profits tax on resource companies has also damaged Australia’s reputation overseas and added to sovereign risk, Albanese said in an interview broadcast today on ABC’s “Inside Business.” “This is half our balance sheet at risk because we have someone now coming in to say, ‘I want to be your silent partner: I want 40 percent of your pretax profits and largely written-off assets,’” Albanese told the program. He said the related cost was difficult to assess because of the complexity of the tax, and may amount to “well over 50 percent.” The government set aside A$38.5 million ($32.6 million) in its May 11 budget to promote an overhaul of the nation’s tax system, including the resources levy. Mining companies oppose the tax, scheduled to take effect in 2012, placing full-page advertisements in Australian newspapers to lobby for changes. Last week, the government said it will run its own advertising campaign to counter the “misinformation.” Treasurer Wayne Swan said in an e-mailed statement today that the super profits tax, or RSPT, wouldn’t be retroactive. ‘Misleading’ Claims “There has been much comment from mining companies in recent weeks about the supposed ‘retrospectivity’ of the RSPT,” Swan said. “These claims are clearly misleading, as the RSPT will apply to mining profits from 1 July 2012. It does not apply to past profits.” Rio’s CEO said it was important to reconsider the proposal and he’s ready to work with Prime Minister Kevin Rudd ’s government on a fundamentally different approach. The world’s third-largest mining company is already paying almost 35 percent tax plus royalties, and will publish independently audited data on its tax payments later in the week, he said. “Albanese left no doubt he’s willing to engage on a long- term, workable solution, arguably a process companies like Rio should have been involved in before the tax was announced,” said Tim Schroeders , a fund manager at Pengana Capital Ltd. in Melbourne. Core Elements The government “won’t back away” from the core elements of its proposal, Finance Minister Lindsay Tanner told Channel Ten’s “Meet the Press” program today. Still, Swan told parliament last week that the government was continuing to consult with industry as criticism of his administration’s proposed advertising campaign mounted. The Shadow Minister for Employment and Workplace Relations, Eric Abetz , today called for a senate inquiry into the government’s handling of its advertising campaign. “Labor is breaking its own guidelines in order to run a partisan political campaign,” he said in a media release. “This has all the stench of a desperate government facilitating false excuses to run a political campaign at taxpayers’ expense.” The government’s use of taxpayer money to get its message across is “a scandalous situation,” billionaire businessman Clive Palmer said on “Meet the Press” today. The super-tax proposal itself is also hurting overseas investment and is likely to damage Australian jobs and livelihoods, he said. ‘National Interest’ Rudd told journalists in Melbourne yesterday the campaign is in the national interest, while Tanner said Australia’s economy could be harmed if misinformation about the tax went unanswered. Wal King , the head of Leighton Holdings Ltd. , Australia’s biggest construction company, said builders are also worried about the tax, the Weekend Australian reported yesterday. He made the comments in a statement as president of the Australian Constructors Association, the newspaper said. The mining-tax plan has prompted Rio Tinto to re-evaluate all its projects in Australia, Albanese said in the ABC interview. “I have said to each of my managers, including during discussions this week while I’ve been in Australia, that every single project in Australia needs to be tested and retested and recalibrated, basically remodeled, on a worst-case tax assumption,” he said. Minerals Council The Minerals Council of Australia ran an advertisement on YouTube and began a radio campaign on May 24 against the tax, saying Australian miners will pay a levy of 58 percent, “by far the world’s highest tax on mining.” It compares with the 23 percent paid in Canada, 30 percent in Russia and 33 percent in South Africa, the council said. Rudd’s government and resources companies are also clashing over the definition of a “super” profit, which the proposed tax sets at returns above the long-term Australian government bond rate of about 6 percent. Rudd’s Labor party and the Liberal-National opposition coalition led by Tony Abbott are tied in the polls, according to a Newspoll survey of 1,159 people taken between May 14 and 16 and published in the Australian newspaper on May 17. Voter dissatisfaction with Rudd rose to 51 percent, from 40 percent in February, in the lead up to a national ballot that must be called by April. Rudd would lose an election called now, according to a Herald/Nielsen poll published on May 10. To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net .

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Robert G. Eccles: Going Green in Annual Reports

May 28, 2010

Co-authored with Michael P. Krzus Over 1,000 supporters of corporate reports that go beyond the financials to include information about a company’s environmental, social, and governance (ESG) performance are attending the Global Reporting Initiative’s (GRI) Global Conference on Sustainability and Transparency in Amsterdam this week to advocate greater and more rapid adoption of sustainability reporting. More attention to sustainability reporting comes on top of decades of new accounting standards and regulatory disclosure requirements that have made companies’ financial statements long, complex, hard to understand, and costly to prepare. While each new standard and disclosure requirement is well-intended, the cumulative effect has been to reduce the usefulness of financial statements for all but the most sophisticated consumers of this information. In the United States, the Securities and Exchange Commission (SEC) has tried to address this problem in two ways. First, the Advisory Committee on Improvements to Financial Reporting made some modest recommendations for reducing complexity. Second, the concept of Extensible Business Reporting Language (XBRL) was introduced for the filing of financial statements. XBRL is the use of electronic tags to make it easier to report, receive, and analyze financial information. Despite these worthy efforts, the fact remains that the burden on companies for reporting to shareholders and other stakeholders–something that is especially great for publicly-listed small and medium-sized enterprises–continues to grow. Indeed, as society’s concerns about sustainability increase, institutional investors see that good performance on ESG dimensions is essential for creating long-term economic value, and they are placing increasing demands on companies for greater transparency and reporting. A few innovative companies around the world–such as American Electric Power in the U.S., Philips in The Netherlands, Novo Nordisk in Denmark, BASF in Germany, Anglo Platinum in South Africa, and Natura in Brazil–are responding. They have recently started issuing a single “integrated report” that combines information on financial, environmental, social, and governance performance. Companies issuing “One Report” note that it is a logical consequence of having a sustainable strategy to support a sustainable society, a way of ensuring a consistent message both internally and externally, and an important step towards reducing complexity and costs. Although analysts and investors are still learning how to incorporate sustainability into their investment analysis, they want to know about a company’s commitments in this area. What better way to make this clear than by integrating this information into the document they are used to reading–the annual report? We expect this practice to become increasingly common all over the world. But companies can do only so much on their own. Ultimately, it is regulators like the SEC and the European Commission, accounting standard setters like the Financial Accounting Standards Board and the International Accounting Standards Board, and groups seeking to establish standards for nonfinancial performance such as the GRI that determine the level of complexity in external reporting. Thus we strongly urge the SEC to implement a voluntary filing program for integrated reporting, just as it did for XBRL; securities regulators in other countries should do something similar. Under this program, companies would be able to file a report on what they consider to be the key metrics for their financial and nonfinancial performance on a completely voluntary basis. In doing so, they would disclose the standards on which these metrics are based and whether they have been audited and by whom. Of course, a voluntary filing program will have value only if companies participate in it. We see three major objections in their doing so: the time and cost to prepare an integrated report, shareholders and other stakeholders seeking information not included in the integrated report, and potential legal liabilities. All are easily addressed. First, companies already producing One Report have found it to be enormously valuable in implementing a sustainable strategy and communicating with their board. Second, One Report doesn’t mean “only One Report” and companies can use the Internet to provide more detailed information to specific stakeholders, a practice followed by companies already producing an integrated report. Third, regulators implementing voluntary filing programs can simply provide the necessary legal protections, as the SEC did with its voluntary filing program for XBRL. The benefits of such a program would be enormous. Investors and securities regulators would get a clear view on what companies regard as their key performance metrics. This would be useful input in future efforts to simplify financial reporting, codify standards for nonfinancial reporting, and begin to establish guidelines for companies to publish a single integrated report. In identifying and reporting in a single document the truly material financial and nonfinancial metrics and relationships between them necessary to understand a company’s past performance and future prospects, an integrated report will reduce the complexity that comes from detailed information of little value and the cost of issuing multiple reports. Integrated reporting is a way of solving two problems at once: the burden of increasing complexity and cost of financial reporting, and the growing demands for nonfinancial information. Integrated reporting is a simple idea, but it is an idea whose time has come. Voluntary filing programs are an easy and practical way to make this idea the common practice in companies’ external reporting. It is now up to regulators to make it happen. Robert G. Eccles is a Senior Lecturer at Harvard Business School and Michael P. Krzus is a partner at Grant Thornton. They are the authors of “One Report: Integrated Reporting for a Sustainable Strategy.”

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Gold Rising as Euro Wanes Makes Wall Street Speculate This Time Different

May 24, 2010

By Nicholas Larkin, Claudia Carpenter and Millie Munshi May 24 (Bloomberg) — Speculators are buying gold faster than the world’s biggest producers can mine it as analysts forecast a 26 percent rally that may extend the longest run of annual gains since at least 1920. Exchange-traded products backed by bullion added 42.5 metric tons in the week to May 14, the most in 14 months, data from UBS AG show. China, Australia and the 16 other largest mining nations averaged weekly output of 42.3 tons last year, researcher GFMS Ltd. estimates. Even though prices have fallen 4.8 percent to $1,189.75 from a record $1,249.40 an ounce May 14, the median in a Bloomberg survey of 23 traders, analysts and investors shows it will reach $1,500 by the end of the year. Buying accelerated as the MSCI World Index of 23 developed nations’ stocks tumbled as much as 16 percent since mid-April and the euro weakened to a four-year low against the dollar. Holders of ETPs, including George Soros and John Paulson , accumulated a record 1,921 tons by May 14, eclipsing all but four of the biggest central-bank holdings. “You could see gold go up another $1,000,” said Evan Smith , who helps manage $2 billion at U.S. Global Investors Inc. in San Antonio and in 2006 correctly predicted that gold would reach $700 within two years. “All of the turmoil and problems we’ve seen in Europe is just another reminder that there’s a lot of value in gold as a safe haven.” The risk to gold bulls lies in economic growth, which should buoy the prospects of metals linked to industrial demand, such as copper and silver . The world economy will expand 4.2 percent this year, the International Monetary Fund said April 21, raising its January projection from 3.9 percent. Industrial Metals Astor Asset Management LLC, with $520 million under management, held as much as 10 percent of its assets in the SPDR Gold Trust, the biggest ETP backed by bullion, according to Bryan Novak , managing director of the Chicago-based company. The firm sold the stake in the first quarter. China, the biggest consumer of industrial metals, will expand 10.1 percent this year, more than three times the pace of the U.S.’s anticipated 3.2 percent gain, according to as many as 77 economists surveyed by Bloomberg. “The feeling now is as we move into the expansion phase of economic growth, we want to be diversified in economically sensitive metals,” Novak said. “We’re not negative on the economy now.” ‘Afraid of Debasement’ While gold is favored by investors when the dollar weakens and inflation gains, the metal can also advance at other times. Gold rose 5.8 percent in 2008 as U.S. consumer prices gained 0.1 percent. The metal added 18 percent in 2005 when the U.S. Dollar Index , a measure against six counterparts, advanced 13 percent. Gold rose 8.5 percent this year as the U.S. Dollar Index jumped 10 percent. U.S. consumer prices dropped in April. “People are afraid of the debasement of all the currencies,” said Peter Schiff , president and chief global strategist for Darien, Connecticut-based Euro Pacific Capital, whose clients have more than $2 billion in assets. “What’s surprising is that gold is still as low as it is,” he said, predicting $5,000 to $10,000 an ounce in the next five to 10 years. Since the last week of April, ETPs have been adding bullion at a pace not seen since the first quarter of 2009, in the wake of the collapse of Lehman Brothers Holdings Inc. Buying rose as European policymakers agreed on an almost $1 trillion emergency loan package to prevent sovereign defaults. Half the Peak Gold is still at half the peak set in 1980, after adjusting for inflation. Then, prices rose to $850, equal to $2,266 today, according to a calculator on the website of the Federal Reserve Bank of Minneapolis. Supply from mines, which peaked in 2001, fell in five of the last eight years, data from London-based GFMS show. Companies are digging deeper to extract dwindling reserves, with mines in South Africa extending as far as 2.35 miles (3.8 kilometers) down. Investment, including bars and coins, almost doubled to 1,901 tons last year, exceeding jewelry demand for the first time in three decades, according to GFMS. Jewelry will jump 19 percent to 2,100 tons this year and industrial use 8 percent to 398 tons, Sydney-based Macquarie Group Ltd. says. Muenze Oesterreich AG, the Vienna-based mint that makes the Philharmonic, the best-selling gold coin in Europe and Japan, on May 12 said it had sold 243,500 ounces since April 26, more than the 205,300 ounces sold in the entire first quarter. Central Banks Central banks and governments are also buying gold, adding 425.4 tons last year, for a combined 30,116.9 tons, the most since 1964 and the first expansion since 1988, data from the World Gold Council show. Official reserves of central banks and governments may expand by another 192 to 289 tons this year, according to CPM Group, a research and asset-management company in New York. The net-long position in Comex futures, or bets on higher prices, is within 13 percent of the record reached in November, U.S. Commodity Futures Trading Commission data show. The most widely held option gives owners the right to buy gold at $1,500 an ounce by December, data from the bourse in New York show. Economists’ outlook may be too rosy, said Michael Pento , chief economist at Delta Global Advisors in Holmdel, New Jersey, who correctly predicted the 2008 commodity collapse. Some investors judge that a debt crisis in Greece may spread elsewhere in the euro zone, including Spain and Portugal. “The second half of this year will likely show very anemic growth on a global basis,” he said. “The crisis in Greece is going to spread to Spain and it’s going to be very difficult to deal with. They are bailing out debt with more debt and it isn’t sustainable. It’s a wonderful scenario for gold.” Billionaire Managers Billionaire John Paulson’s New York-based Paulson & Co. hedge fund is the SPDR gold trust’s biggest investor , with 31.5 million shares, or about 96 tons, a May 17 regulatory filing showed. Kyle Bass , the head of Dallas-based Hayman Advisors LP who made $500 million in 2007 on the U.S. subprime collapse, bought gold this month, according to a letter to clients. Buying at the start of a bubble is “rational,” Soros said in January. His New York-based Soros Fund Management LLC was the sixth-biggest investor in the SPDR fund in the first quarter, a May 17 filing with the Securities and Exchange Commission shows. He trimmed his holding by 9.6 percent from the previous quarter. “People still want a store of wealth,” said Andrew Karsh , co-manager of funds for the Credit Suisse Total Commodity Return Strategy team. “A lot of the fundamentals are still in place.” To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net ; Claudia Carpenter in London at ccarpenter2@bloomberg.net ; Millie Munshi in New York at mmunshi@bloomberg.net .

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Mining Profit-Tax `Contagion’ Is Poised to Spread Worldwide From Australia

May 19, 2010

By Madelene Pearson and Jesse Riseborough May 20 (Bloomberg) — Australia’s planned 40 percent tax on mining profits has set a benchmark for other countries weighing higher levies, reducing earnings forecasts for BHP Billiton Ltd. and Rio Tinto Group and the attraction of mining stocks. “It could create what the miners are now describing at a global level as a type of tax contagion,” said Tom Price, commodities analyst with UBS AG in Sydney, in an interview. “They might levy a new tax at the miners in Brazil. Canada is another mineral province and South Africa.” BHP, the world’s largest mining company, Xstrata Plc and Rio said they are reviewing projects in Australia, the No. 1 exporter of coal and iron ore, after the government unveiled the tax this month, saying a country’s resources belong to the people. Citigroup Inc. Sydney-based analyst Craig Sainsbury said Canada, Peru and Chile may be next. “Resource nationalism” is a major risk facing miners in the next few years, Evy Hambro , manager of BlackRock Investment Management Ltd.’s flagship $14.3 billion World Mining Fund said last month. Chile, the biggest copper exporter, is proposing a temporary rise in mining taxes to help pay for earthquake reconstruction that may cost BHP, Xstrata and Anglo American Plc $1.2 billion in the next two years. Brazil, the second-biggest iron ore exporter, may tax shipments of the commodity or raise royalties, Energy and Mining Minister Edison Lobao has said. ‘Markets Suicide’ The Australian tax plan is “global financial markets suicide,” according to Charlie Aitken , the executive director of Southern Cross Equities Ltd., the equal top ranked predictor of BHP’s share price performance of 17 analysts, according to data compiled by Bloomberg. Mining companies’ earnings may be cut by almost a third when the tax starts in 2012, Moody’s Investor Services said this week. The tax would be broadly credit negative for the sector and raise uncertainty for some companies over the short-to- medium term, Moody’s said this month. The tax may also prompt European and Scandinavian nations to seek a greater share of revenue from production, Magnus Ericsson , a senior partner at Raw Materials Group, a mining data and analysis company, said this month. The proposal will make Australian mines the highest taxed in the world, according to Minerals Council of Australia. “Economies, particularly European economies, are going to have to deal with deficits,” said Jamie Nicol , chief investment officer at Dalton Nicol Reid in Brisbane, which manages about A$550 million ($472 million) including BHP and Rio shares. “They are going to look at some sort of innovative tax solutions to try and claw back some of that.” Levy Wars Fortescue Metals Group Ltd. , Australia’s third-largest iron ore exporter, has dropped 16 percent and BHP’s Melbourne-traded stock has fallen 9.3 percent, while the Australian currency has slid 7.6 percent since the government announced the tax on May 2. Fortescue this week placed $15 billion of projects on hold, citing the tax. Nations that resist may attract investment. South Africa taxes mining companies at 33 percent, Canada 23 percent and China 30 percent compared with a forecast 58 percent in Australia after the tax, according to Citigroup data. Australian Treasurer Wayne Swan has said he “strongly disagrees” with claims the tax will damage miners. China’s demand for Australian metals will outweigh higher taxes, according to AMP Capital Investors Ltd., a unit of the country’s largest pension plan provider, which hasn’t changed its industry assessment. Rio , the world’s third-largest mining company, this month said it will spend $401 million to boost iron ore output in Canada, citing the “attractiveness of investing” in the North American nation. BHP has said the tax would stymie investment. “It doesn’t matter if it’s the Congo or Sudan, or it’s Australia or Canada, these projects require commitments by governments that are 30 years and when they move the goal posts they will have a serious rippling effect,” said Frank Holmes , chief investment officer of U.S. Global Investors Inc., which manages about $3 billion. “They could stifle the world.” To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

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Euro’s Drop Accelerates to Lowest Level in Four Years on Austerity Concern

May 18, 2010

By Oliver Biggadike and Ben Levisohn May 18 (Bloomberg) — The euro touched its lowest level in four years against the dollar on concern nations with the highest deficits will struggle to meet the European Union’s austerity requirements. The euro’s drop accelerated as speculation increased that European financial institutions are worse than anticipated after Germany said it will ban naked short-selling and naked credit- default swaps of euro-area government bonds and the Bank of Italy allowed lenders to exclude losses on government bonds. Sweden’s krona, South Africa’s rand, Australia’s dollar and Norway’s krone were the only major currencies to fall versus the euro as a slide in stocks and commodities damped demand for riskier assets. “Things may be a lot worse than they appear,” said Lane Newman , director of foreign exchange at ING Groep NV in New York. “The market for the most part doesn’t need reasons to be negative. There’s been a broad change in what the market has been doing, catalyzed by fact that the Europeans have been unable to comfort international investors. Until the situation is settled, the market will be a seller of all things that can be classified as risk.” The euro fell as much as 1.9 percent to $1.2162, the lowest level since April 17, 2006, before trading at $1.2208 at 3:15 p.m. in New York. It fell 1.6 percent to 112.79 yen, the lowest level since May 6, from 114.77. The dollar traded at 92.44 yen from 92.59. Germany’s BaFin financial-services regulator said that it will introduce a temporary ban on naked short-selling and naked credit-default swaps of euro-area government bonds starting at midnight. The ban will also apply to naked short-selling in shares of 10 banks and insurers including Allianz SE and Deutsche Bank AG, BaFin said today in an e-mailed statement. ‘More Fiscal Space’ “It’s being taken as a sign they have to do something to protect their markets,” said Amelia Bourdeau , a UBS AG currency strategist in Stamford, Connecticut. “The naked short ban on bonds and stocks seemed to be a catalyst.” The Bank of Italy said in a statement today that Italian banks are allowed to opt for new rules aiming at “neutralizing” the effect of capital losses and capital gains on regulatory capital from holding European government bonds. The euro gained earlier as EU Economic and Monetary Affairs Commissioner Olli Rehn said only countries such as Greece, Portugal and Spain that have high deficits would have to make additional deficit cuts. Budgets in countries with “more fiscal space” would be untouched to preserve growth, he said. “Countries with no or little fiscal space will need to frontload or accelerate measures,” Rehn said in Brussels after a two-day meeting of European finance ministers. “Others that have more fiscal space should maintain their less-restrictive fiscal stances for the sake of growth in Europe as a whole.” ‘Unstoppable’ Fall Another euro-region financial rescue package may be “inevitable” and the euro’s “unstoppable” fall could send it to parity with the U.S. dollar, former Bank of England policy maker David G. Blanchflower said today in an interview on Bloomberg Television. Blanchflower is a contributor to Bloomberg News. Euro area policy makers unveiled last week an unprecedented loan package of nearly $1 trillion and a program of bond purchases to prevent defaults by countries including Greece, Spain and Portugal. Spain announced on May 14 the biggest budget cuts in at least 30 years and Portugal followed a day later, pledging to slash wages and raise taxes. Italy said May 16 it may make an extraordinary reduction in spending, and France is scheduled to submit spending plans this week. ‘Deeper Crisis’ The euro may fall to $1.16 during the next three months as the sovereign-debt crisis forces the European Central Bank to keep borrowing costs low, according to Credit Suisse Group AG. The last time the euro traded at that level was in November 2003, according to Bloomberg data. Credit Suisse previously forecast that the 16-nation currency would trade at $1.29. “The euro is now a low-yielding currency suffering a deeper crisis of confidence than we expected, with little near- term outlook for support from interest-rate policy,” Credit Suisse strategists including Ray Farris in London and Daniel Katzive in New York wrote in a note to clients. “We think that euro-dollar will need to trade to obviously cheap levels to generate sustained buying interest in the near term.” Europe’s currency dropped 8.9 percent this year against its developed-world counterparts, according to Bloomberg Correlation Weighted Indices. Norway’s krone fell as much as 2.5 percent to 6.3703 per dollar and South Africa’s rand fell 1.1 percent to 12.3880 yen as a decline in oil and commodities encouraged investors to decrease carry trades, in which they buy higher-yielding assets with cash borrowed in nations with low interest rates. The benchmark interest rate of 0.1 percent in Japan has made the yen popular for funding such transactions. Norway is the world’s sixth largest oil exporter. Gold and platinum account for almost a quarter of South Africa’s export earnings. To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net ; Ben Levisohn in New York at blevisohn@bloomberg.net .

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Captured Al-Qaeda Member Was Involved in World Cup Terror Plot, Iraq Says

May 17, 2010

By Nayla Razzouk and Caroline Alexander May 17 (Bloomberg) — Iraq announced the capture of two al- Qaeda members and said one of them was involved in a plot to attack the soccer World Cup next month in South Africa. The men from al-Qaeda’s Iraq branch were identified as Abdullah Azzam Saleh al-Qahtani, a Saudi Arabian national, and Abu Yassin al-Jazairi, an Algerian, Major General Qassim Atta, spokesman for the Baghdad Military Command, said in a news conference today in the capital. Al-Qahtani worked with Ayman al-Zawahiri , deputy to Osama bin Laden , “to plot terrorist attacks during the World Cup in South Africa,” the spokesman said in the briefing on state- owned al-Iraqiya television. Atta didn’t provide further details about the alleged plot on the world’s most-watched sporting event, which starts June 11. Police in South Africa are making inquiries into the Iraqi investigation, the South African Press Association reported. Al-Qahtani, who was born in 1979, was a lieutenant in the Saudi Arabian army before entering Iraq and serving as al-Qaeda security chief in Baghdad, Atta said. He was detained under a false name by U.S. forces in Iraq in 2007 and released in 2009. Al-Qahtani is also accused of playing a role in attacks on Shiite Muslim religious sites in the Iraqi cities of Karbala and Najaf, killing jewelers and robbing jewelry shops, blowing up hotels in Baghdad, and plotting bank heists, according to Atta. Al-Jazairi, was born 1976, the spokesman said. He entered Iraq from Syria and was caught by U.S. forces in 2006 and released in 2008, he said. Post-Elections Violence Violence in Iraq has dropped from its peak levels in 2006-7 when the country tipped toward civil war between majority Shiite and minority Sunni Muslims. A surge in attacks following inconclusive elections on March 7 has been blamed by government officials on an attempt by al-Qaeda to re-ignite sectarian tensions and undermine confidence in Iraq’s security forces. At least 90 people were killed and 340 wounded on May 10 in attacks across Iraq. A car bombing and a suicide blast at a soccer game on May 14 left at least 25 people dead and another 100 wounded. In a statement posted on the Internet over the past weekend, al-Qaeda announced replacements for its leaders in Iraq, Abu Omar al-Baghdadi and Abu Ayyub al-Masri , who were killed on April 19 in a joint U.S.-Iraqi raid. The replacements were identified as Abu Bakr al-Baghdadi al-Husseini al-Qurashi and his deputy, Abu Abdalluh al-Hussani al-Qurashi. In a separate statement, the group also named its new “minister of war” as al-Nasser Lideen Allah Abu Suleiman. Atta said that “al-Qaeda was facing difficulties,” particularly financial difficulties, which he said explained why it has targeted banks and jewelers. To contact the reporters on this story: Nayla Razzouk in Amman, Jordan, at nrazzouk2@bloomberg.net ; Caroline Alexander in London at calexander1@bloomberg.net .

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Video: Kolhatkar Discusses South African Economy, World Cup: Video

May 14, 2010

May 14 (Bloomberg) — Bloomberg Businessweek’s Sheelah Kolhatkar talks with Erik Schatzker about South Africa’s economic growth and racial tensions. South Africa hosts the soccer World Cup beginning June 11. (Source: Bloomberg)

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Video: Kolhatkar Discusses South African Economy, World Cup: Video

May 14, 2010

May 14 (Bloomberg) — Bloomberg Businessweek’s Sheelah Kolhatkar talks with Erik Schatzker about South Africa’s economic growth and racial tensions. South Africa hosts the soccer World Cup beginning June 11. (Source: Bloomberg)

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`Black Boxes’ Retrieved After Libya Crash Kills 103; Boy Is Only Survivor

May 12, 2010

By Alaa Shahine and Franz Wild May 13 (Bloomberg) — An Airbus SAS jet’s “black box” voice and data recorders were recovered from the wreckage of the Afriqiyah Airways flight that crashed on landing in Tripoli, Libya, killing all but one of the 104 people on board. Rescue workers recovered 96 bodies after yesterday’s accident along with the flight recorders, Libya’s official JANA news agency said, citing Transportation Minister Mohamed Zeidan. The 93 passengers included 62 Dutch tourists, of whom one, a child, survived, according to Markus van Tol, a spokesman for the ANWB Royal Dutch Tourist Association. The twin-engine A330 plane “crash-landed in the final approach” after the flight from Johannesburg, airline spokeswoman Elizabeth McQuiggan said in a telephone interview, adding that it’s not clear what caused the accident. The wide-body plane, powered by engines from General Electric Co. , first flew on Aug. 12 last year and was delivered new to Afriqiyah Airways on Sept. 8, according to U.K. aviation consultants Ascend Worldwide Ltd. The crash is the second in 12 months involving an A330, and Airbus said it will provide “full technical assistance” to air-accident investigators. Zeidan said there is no evidence that terrorism caused the accident, according to JANA. Passengers on the flight came from Britain, Finland, France, Germany, the Philippines and Zimbabwe, as well as Libya, South Africa and the Netherlands, he was reported as saying. Crash Site Metal parts from the plane, which crashed at about 6 a.m. local time, were strewn on the ground at the site of the impact, television footage showed, while rescue workers could be seen wearing masks and searching for survivors in the wreckage. The service, Afriqiyah Flight 771, was also carrying 11 crew members, the Tripoli-based airline said on its website . Afriqiyah, which was founded in 2001 and serves cities in Africa, Asia and Europe, had an 11-strong Airbus fleet before the crash, including two more A330s, Ascend safety director Paul Hayes said by e-mail. Of the 93 passengers on the flight, 11 had planned to end their journey in Tripoli, with the rest travelling to onward destinations, a spokeswoman for Johannesburg airport said at a press conference broadcast on Dutch television. Some 42 people were due to catch a connection to Dusseldorf in Germany, with 32 bound for Brussels, seven for London and one for Paris, she said. Dutch Victims Dutch holiday company Kras.nl, part of TUI Travel Plc, had clients on the plane, according to its website. Another tour operator from the Netherlands, Stip Reizen, said 38 of its customers were en route to Dusseldorf, the ANP news agency reported, citing a spokeswoman from the company, and the ANWB’s von Tol said some Brussels-bound passengers were also Dutch. “This is truly tragic and touches us all,” Dutch Prime Minister Jan Peter Balkenende said on national television, adding that there is “uncertainty” about passenger logs and the exact number of people from his country on the flight. The child who survived is a boy who shouted “Holland, Holland,” while being treated for fractures at a hospital in Tripoli, leading to the conclusion regarding his nationality, Dutch Foreign Affairs minister Maxime Verhagen said. Forensic experts have been sent to the crash scene in order to aid identification of bodies, the minister said at a press conference in The Hague. The British Foreign Office confirmed on its website that one U.K. national was on the plane. Afriqiyah’s route network includes London Gatwick airport. An Airbus A330 operated by Air France crashed into the Atlantic Ocean on June 1 while en route from Rio de Janeiro to Paris, killing all 228 people on board. While more than 1,000 pieces of debris and 50 bodies have been found, no definitive reason has been presented for the accident, with early studies suggesting the plane flew into poor weather with speed sensors that weren’t properly functioning. The black boxes from the aircraft have yet to be recovered. Prior to the Air France incident the A330 had never had a fatal crash in commercial flight, though a development model came down after takeoff during testing, according Hayes, who says there are 650 of the jetliners in operation worldwide. To contact the reporters on this story: Franz Wild in Johannesburg at fwild@bloomberg.net ; Alaa Shahine in Cairo at asalha@bloomberg.net

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Standard Chartered Said to Consider Offering to Buy South Africa’s Nedbank

May 12, 2010

By Jon Menon and Renee Bonorchis May 12 (Bloomberg) — Standard Chartered Plc , the British lender that earns three-quarters of its profit in Asia, may make an offer for South Africa’s Nedbank Group Ltd., said a person with knowledge of the situation. The deliberations are at an early stage and may break down, said the person, who declined to be identified because the talks are private. Old Mutual Plc , Africa’s biggest insurer, owns 52 percent of Nedbank, which has a market value of about 69 billion rand ($9.2 billion). Any decision on Nedbank’s future would be up to Old Mutual, said Don Bowden , a spokesman for Johannesburg-based Nedbank. Tim Baxter , a spokesman at Standard Chartered in London, declined to comment as did Patrick Bowes , a spokesman for Old Mutual. Sky News, which reported the plans late yesterday, said Goldman Sachs Group Inc. is advising Standard Chartered. Standard Chartered was profitable during the credit crisis and didn’t receive a government bailout. The lender said last week it had a “very strong” profit in the first quarter. Run by Chief Executive Officer Peter Sands , the bank is the best performer in the FTSE 350 Index of five British lenders over the past 12 months . The takeover would be the biggest by a British bank since Lloyds Banking Group Plc acquired HBOS Plc, the country’s largest mortgage lender, in a government-brokered deal in the credit crisis of 2008, according to data compiled by Bloomberg. Standard Chartered declined 2.6 percent to 1,657.5 pence at 9:31 a.m. in London trading, while Old Mutual gained 5.4 percent to 119.2 pence. Nedbank gained 3.6 percent to 140.20 rand in Johannesburg. To contact the reporters on this story: Jon Menon in London at jmenon1@bloomberg.net Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

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English Pubs Rely on Rooney’s Groin to Get World Cup Beer Taps Flowing

May 11, 2010

By Andrew Cleary May 11 (Bloomberg) — The future of England’s dwindling pub industry rests with Wayne Rooney ’s groin. Bars across the country are building stadium-style seating, upgrading televisions and offering free meals to fans as they bank on a strong showing from England in soccer’s World Cup to provide a respite from five years of falling beer sales. Fans are concerned whether star player Rooney will recover in time. “The World Cup is the No. 1 boost to pub sales without question, but we really need England to stay in to the quarter finals at least,” Punch Taverns Plc Operations Director Kevin Georgel said in an interview. “If England goes out in the first round, we’ll all be pretty cheesed off.” England reaching the final of the tournament — the world’s most-watched sporting event — may mean 6.5 million additional visits to the nation’s 54,000 taverns, according to Enterprise Inns Plc Chief Operating Officer Simon Townsend . That would lead to a smaller decline in pubs’ beer sales, which have worsened since a 2007 smoking ban and amid cheaper beer in supermarkets, Matrix Corporate Capital LLP analyst John Beaumont said. Rooney, the second-top goal scorer in the Premier League, was withdrawn from Manchester United’s May 9 match after sustaining a second groin injury in three weeks. The World Cup, hosted by South Africa, starts on June 11 and culminates with the final in Johannesburg a month later. “There’s an awful lot riding on this World Cup,” said Nicky Francey, manager of the Sun & Doves pub in the Camberwell district of south London. “We’ve had a year and a half of pubs being really hard hit. This is a chance for all publicans to pick up some sales to keep them surviving a bit longer.” VIP Couch Areas Francey plans promotions such as giving away VIP couch areas in front of large-screen televisions to bring in crowds. “If that doesn’t happen, summer will be difficult,” she said. Pubs will still have to convince fans to pay for the atmosphere as Tesco Plc and Wal-Mart Stores Inc.’s Asda chase business from stay-at-home fans. Tesco, the U.K.’s largest retailer, is running a “World Cup party” promotion on its Web site, offering free delivery of televisions, discounted barbecue products and half-price wines to foster at-home viewing. A six- pack of Beck’s beer has been discounted to 2.98 pounds ($4.47), about the same price as one bottle in a bar. Little more than half of all beer drunk in the U.K. is now consumed in pubs, down from 88 percent in 1979. The smoking ban exacerbated the shift, sending sales down 9.8 percent in 2008 and causing pubs to shutter at the rate of up to 40 a week last year, according to the British Beer and Pub Association . Dwindling Drinkers The World Cup may herald a fight-back. Punch Taverns, the U.K.’s biggest pub owner, has spent 20 million pounds giving a “facelift” to 450 of its 7,100 pubs, Georgel said. Enterprise Inns has partnered with retailers and brewers to offer 3,000 of its pubs giveaways such as balls, sports bags and team jerseys. “There’s no question that England going all the way really matters — we see a noticeable drop-off when England goes out,” said Enterprise’s Townsend. Unlike the 2002 World Cup, which was hosted jointly by Japan and South Korea, matches will be played in a similar time-zone to the U.K., meaning viewers will be more inclined to watch in pubs rather than from home, he said. U.K. bookmaker Ladbrokes Plc is offering odds of 11-2 that England win the tournament, meaning that a winning 2-pound bet would return a profit of 11 pounds. Only Spain and Brazil are shorter prices in the betting. “England has as good a chance of winning this tournament as any team for a generation,” said Ladbrokes spokesman David Williams. ‘Golden Ticket’ England hasn’t won the World Cup since 1966 and last reached the semi-finals in 1990. The nation’s chances this time are dependent on the team suffering no more injury setbacks, especially to Rooney , who is also recovering from an earlier ankle injury, according to sports commentator Mike Parry . “There is a very realistic chance England can make the final with a fit team, but without Rooney they’re half a team,” said Parry, a commentator at U.K. radio station Talksport , which regularly hosts current and former England players. “The very best bet would be for England to get to a semi-final. The effect of that on businesses in this country would be enormous.” Promotions at Punch outlets include a “golden ticket” that will give winners a round of drinks and a free meal every day of the four-week tournament. Pub tenants are able to use assistance funds from the company to buy large-screen televisions, while more than 1,200 licensees have completed training on how to “profit from sport,” Georgel said. The training program covered everything from creating the right food packages to how to spend money refurbishing and marketing a pub to draw in soccer fans, the executive said. Back to Bars At Intertain Ltd. ’s Walkabout chain of Australia-themed outlets, high-definition projection screens have been installed in all 36 of its bars ahead of the tournament, commercial manager James Mawer said. Turf will be laid and stadium seating erected in some larger bars to woo fans, he said. According to Mawer, one in four men in the U.K. plans to watch at least three games at a bar over the month-long event. He cited an internal company survey. “If England does okay, I would expect a boost to pub companies’ sales, but it’s not something to get carried away with,” said Matrix’s Beaumont. The decline in on-premise sales this year may be 3 to 4 percent, rather than the 8 to 10 percent annual drop experienced since the smoking ban, he said. Even if Rooney’s team makes it all the way to Johannesburg for the final match, Punch’s Georgel knows that the industry will still be far from a permanent revival. “We’re still in the early days of consumer recovery,” he said. “The World Cup has the potential to drive consumers back to pubs where they may not have been for some time.” To contact the reporter on this story: Andrew Cleary in London at acleary7@bloomberg.net .

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Brazil Debt Spreads Narrower Than Russia for First Time in 2010 on Greece

May 6, 2010

By Veronica Navarro Espinosa May 6 (Bloomberg) — Brazil’s benchmark borrowing costs slid below Russia’s for the first time this year as investors bet the South American country is less at risk of contagion from the Greek debt crisis than Eastern European nations. Brazilian dollar bonds yielded 2.18 percentage points more than U.S. Treasuries yesterday, compared with 2.19 percentage points for Russia, according to JPMorgan Chase & Co.’s EMBI+ index. Brazilian yields last were below those on Russian debt, which is rated one level higher by Standard & Poor’s and two by Moody’s Investors Service, on Dec. 21. “Brazil offers a safe haven for investors that are concerned about market volatility and contagion related to Greece,” said David Bessey , who helps manage more than $10 billion of emerging-market debt at Prudential Financial in Newark, New Jersey. “It’s not obvious to me that the distortion couldn’t last for a long time given what’s going on in Eastern Europe.” Investors view Brazilian debt as safer than Russian bonds after S&P’s rating cuts of Greece, Portugal and Spain last week threatened to crimp growth in Europe. Russia’s gross domestic product will expand 4 percent this year, the Economy Ministry forecasts. Growth in Latin America’s biggest economy, by contrast, will surge to 6.1 percent this year, according to a central bank survey of analysts published this week. Default Risk     It costs 0.43 percentage point more to protect Russian bonds against default for five years than Brazilian debt, the biggest gap since Feb. 26, according to data compiled by CMA DataVision. Russia is ranked BBB by S&P, the second-lowest investment grade level. Brazil is rated BBB-. The South American country’s swaps are also less expensive than Bahrain, which is rated A, or four levels higher, as well as South Africa, two steps higher. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. Russia’s bond yield spread over U.S. Treasuries widened 18 basis points, or 0.18 percentage point, yesterday while Brazil’s spread climbed 12 basis points. The yield premium on developing- nation debt overall swelled 15 basis points to 2.95 percentage points, the widest in two months. Brazilian bonds yielded 41 basis points more than Russian debt on April 20. Buying Opportunity? The increase in yields to levels higher than both Brazil and Indonesia, rated three notches lower than Russia by Standard & Poor’s, will create a buying opportunity for Russian debt, said Cornel Bruhin , who manages a $280 million emerging-market fund at Clariden Leu AG in Zurich. “The Greece story was just the initiator for a correction in risk markets and Russia bonds will eventually recover very strongly once the correction is over,” he said. Bruhin said he may be ready to buy Russia’s 2020 bonds once the yield has risen another 15 basis points. Russia’s economy is recovering from its worst recession since the Soviet Union collapsed in 1991 as oil rallies. The government’s 2010 budget is based on crude oil averaging $58 a barrel, compared with $80 a barrel so far this year. Russia is more dependent on exports to European countries, while Brazil’s economic growth is driven by domestic demand, said Paul Biszko , an emerging-market analyst at RBC Capital Markets in Toronto. ‘Under Siege’ “The perception of risk has changed,” Biszko said. “These problems in Europe are sustainability problems, longer- term problems. Russia in terms of trade, financial linkages, is much closer to the euro zone than Brazil is.” Investors should buy Latin American currencies if concern about contagion from the Greek financial crisis continues to put Eastern Europe and its currencies “under siege,” Guillaume Tresca , an emerging-market strategist at Credit Agricole CIB in Paris, wrote in a note to clients yesterday. “Since the current issue is seen as a pure European debt problem, it should mean that Latin American countries are less affected,” Tresca wrote. The real dropped 1.7 percent to 1.7951 per dollar yesterday. The decline pared its rally over the past three months to 4.7 percent, the second-best performance among emerging-market currencies after the Malaysian ringgit. The Hungarian forint, Polish zloty and Czech koruna plunged more than 2 percent against the dollar yesterday, leaving each of them down at least 6 percent in the past three months. Brazil Elections The yield on Brazil’s overnight interest-rate futures contract due in January fell six basis points yesterday to 11.13 percent. Shareholders of Rossi Residencial SA , Brazil’s third- biggest homebuilder, approved the sale of as much as 500 million reais of bonds due May 2015, according to a regulatory filing. Brazil’s bonds may slump as the October vote to replace President Luiz Inacio Lula da Silva nears, RBC’s Biszko said. Former Cabinet Chief Dilma Rousseff and former Sao Paulo Governor Jose Serra are the main contenders in the race to succeed Lula, whose second term concludes at year-end. “The market is priced for no noise and a very stable process,” Biszko said. “There could be some not necessarily market friendly comments coming from them as we get closer to the elections.” Brazil’s dollar debt returned 2.4 percent this year, beating the 2.2 percent gain in Russian bonds, according to JPMorgan. Emerging-market bonds overall are up 3.1 percent. Concern about the spreading of Greek debt crisis pushed the average yield on emerging-market bonds to 6.51 percent from a record low of 6.18 percent on April 15, persuading Czech Republic, Albania and Indonesia to delay planned debt sales. Russia sold $5.5 billion of bonds on April 22, its first international issue since defaulting in 1998. Swelling supply has caused the country’s debt to underperform, Prudential’s Bessey said. The yield on the 5 percent bonds due in 2020 has jumped 47 basis points since the offering to 5.55 percent. “The heightened amount of supply has made a difference,” Bessey said. “Russia priced the deal without a lot of concession to investors.” To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

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Brazil Bonds Offer `Safe Haven’ as Spread Drops Below Russia on EU Crisis

May 5, 2010

By Veronica Navarro Espinosa May 6 (Bloomberg) — Brazil’s benchmark borrowing costs slid below Russia’s for the first time this year as investors bet the South American country is less at risk of contagion from the Greek debt crisis than Eastern European nations. Brazilian dollar bonds yielded 2.18 percentage points more than U.S. Treasuries yesterday, compared with 2.19 percentage points for Russia, according to JPMorgan Chase & Co.’s EMBI+ index. Brazilian yields last were below those on Russian debt, which is rated one level higher by Standard & Poor’s and two by Moody’s Investors Service, on Dec. 21. “Brazil offers a safe haven for investors that are concerned about market volatility and contagion related to Greece,” David Bessey , who helps manage more than $10 billion of emerging-market debt at Prudential Financial in Newark, New Jersey. “It’s not obvious to me that the distortion couldn’t last for a long time given what’s going on in Eastern Europe.” Investors view Brazilian debt as safer than Russian bonds after S&P’s rating cuts of Greece, Portugal and Spain last week threatened to crimp growth in Europe. Russia’s gross domestic product will expand 4 percent this year, the Economy Ministry forecasts. Growth in Latin America’s biggest economy, by contrast, will surge to 6.1 percent this year, according to a central bank survey of analysts published this week.     It costs 0.43 percentage point more to protect Russian bonds against default for five years than Brazilian debt, the biggest gap since Feb. 26, according to data compiled by CMA DataVision. Russia is ranked BBB by S&P, the second-lowest investment grade level. Brazil is rated BBB-. The South American country’s swaps are also less expensive than Bahrain, which is rated A, or four levels higher, as well as South Africa, two steps higher. Brazil’s Domestic Demand Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. Russia’s bond yield spread over U.S. Treasuries widened 18 basis points, or 0.18 percentage point, yesterday while Brazil’s spread climbed 12 basis points. The yield premium on developing- nation debt overall swelled 15 basis points to 2.95 percentage points, the widest in two months. Brazilian bonds yielded 41 basis points more than Russian debt on April 20. While Brazil’s economic growth is driven by domestic demand, Russia is more dependent on exports to European countries, said Paul Biszko , an emerging-market analyst at RBC Capital Markets in Toronto. ‘Under Siege’ “The perception of risk has changed,” Biszko said. “These problems in Europe are sustainability problems, longer- term problems. Russia in terms of trade, financial linkages, is much closer to the euro zone than Brazil is.” Investors should buy Latin American currencies if concern about contagion from the Greek financial crisis continues to put Eastern Europe and its currencies “under siege,” Guillaume Tresca , an emerging-market strategist at Credit Agricole CIB in Paris, wrote in a note to clients yesterday. “Since the current issue is seen as a pure European debt problem, it should mean that Latin American countries are less affected,” Tresca wrote. The real dropped 1.7 percent to 1.7951 per dollar yesterday. The decline pared its rally over the past three months to 4.7 percent, the second-best performance among emerging-market currencies after the Malaysian ringgit. The Hungarian forint, Polish zloty and Czech koruna plunged more than 2 percent against the dollar yesterday, leaving each of them down at least 6 percent in the past three months. Brazil Elections The yield on Brazil’s overnight interest-rate futures contract due in January fell six basis points yesterday to 11.13 percent. Shareholders of Rossi Residencial SA , Brazil’s third- biggest homebuilder, approved the sale of as much as 500 million reais of bonds due May 2015, according to a regulatory filing. Brazil’s bonds may slump as the October vote to replace President Luiz Inacio Lula da Silva nears, RBC’s Biszko said. Former Cabinet Chief Dilma Rousseff and former Sao Paulo Governor Jose Serra are the main contenders in the race to succeed Lula, whose second term concludes at year-end. “What complicates Brazil is that you have elections coming,” Biszko said. “The market is priced for no noise and a very stable process. There could be some not necessarily market friendly comments coming from them as we get closer to the elections.” Bond Sales Delayed Brazil’s dollar debt returned 2.4 percent this year, beating the 2.2 percent gain in Russian bonds, according to JPMorgan. Emerging-market bonds overall are up 3.1 percent. Concern about the spreading of Greek debt crisis pushed the average yield on emerging-market bonds to 6.51 percent from a record low of 6.18 percent on April 15, persuading Czech Republic, Albania and Indonesia to delay planned debt sales. Russia sold $5.5 billion of bonds on April 22, its first international issue since defaulting in 1998. That sale has also caused the country’s debt to underperform by swelling the supply, Prudential’s Bessey said. The yield on the 5 percent bonds due in 2020 has jumped 47 basis points since the offering to 5.55 percent, according to Bloomberg data. “The heightened amount of supply has made a difference,” Bessey said. “Russia priced the deal without a lot of concession to investors.” To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

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Glencore Said to Consider Xstrata Merger to Create Mining Rival to BHP

May 2, 2010

By Brett Foley and Jacqueline Simmons May 2 (Bloomberg) — Glencore International AG, the world’s largest commodity trader, is studying a merger with Xstrata Plc, to create a mining company with operations on six continents, according to two people familiar with the matter. Glencore, which already owns 34 percent of Xstrata, is also considering an initial public offering, said the people who declined to be identified because the talks are confidential and no decision has been reached. No agreement is imminent, the people said. Marc Ocskay , a spokesman for Glencore, and Xstrata spokeswoman Claire Divver both declined to comment. For Zug, Switzerland-based Xstrata , a company with a market value of 31.9 billion pounds ($49 billion), a transaction would create a mining and trading group rivaling BHP Billiton Ltd. with operations from Peru to Kazakhstan. A deal would allow Glencore access to capital to fund its activities and ease liquidity constraints, while providing some of the group’s partners with the ability to exit their stakes in the company. Glencore, a closely held partnership which trades metals and oil and controls mines and smelters, in December sold as much as $2.2 billion of bonds to investors including BlackRock Inc. and Government of Singapore Investment Corp. The bonds are convertible upon an IPO or “other pre-determined qualifying events” and the trader is facing pressure on how it will deliver equity to investors, one of the people said. The terms of the bonds give Glencore a pre-conversion equity value of $35 billion. Reverse Takeover? Advisers are working on a two-stage proposal in which Glencore would merge with Xstrata in a “reverse takeover” and then reduce its stake in the enlarged group to below 40 percent, the Sunday Telegraph said earlier today, without saying where it got the information. Xstrata management would retain control of the combined company, the newspaper said. Xstrata, led by Chief Executive Officer Mick Davis, is the largest producer of coal burned by power stations and fourth- largest producer of copper and nickel. Davis has expanded the group through more than $35 billion of acquisitions since it sold shares in an initial public offering in London in 2002. Glencore, led by Chief Executive Officer Ivan Glasenberg , battled liquidity concerns in the second half of 2008 as commodity prices slid amid the global financial crisis. Glencore’s credit rating was cut by Standard & Poor’s to BBB-, the lowest investment grade, in December that year. Senior staff agreed to defer their first termination payment in the event of their departure until at least 2012, Glencore told bondholders in March 2009, in an attempt to strengthen its finances. Melbourne-based BHP, the world’s largest mining company, has a market value of A$210.7 billion ($194 billion) and it had sales in the year to June 30, 2009 of $50.2 billion, according to data compiled by Bloomberg. Glencore’s sales in 2009 were $106.4 billion, the company said March 10. Morgan Stanley and Citigroup Inc. are working with Glencore, while Xstrata is advised by Deutsche Bank AG and JPMorgan Cazenove Ltd. As well as trading commodities, Glencore owns 8.7 percent of Moscow-based United Co. Rusal, the world’s largest aluminum producer, controls zinc mines in Peru and Kazakhstan, coal mines in South Africa, and smelts copper in the Philippines. To contact the reporters on this story: Brett Foley in London at bfoley8@bloomberg.net ; Jacqueline Simmons in Paris at jackiem@bloomberg.net

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Stocks, Oil Rise on Economy; Emerging Market Currencies Gain

April 29, 2010

By Rita Nazareth and Gavin Serkin April 29 (Bloomberg) — Stocks rallied the most in almost two months as companies from Motorola Inc. to Unilever NV posted better-than-estimated profit and European leaders moved closer to rescuing Greece. Higher-yielding currencies gained after the Federal Reserve pledged to keep interest rates at a record low. The Standard & Poor’s 500 Index climbed 1.3 percent and the MSCI World Index of stocks in 23 developed nations gained 1.2 percent at 11 a.m. in New York, the most since March 5 for both. The ASE Index jumped 7.1 percent in Athens, the biggest rally this year, as the European Union said it’s close to agreeing on a bailout to prevent a Greek default. The extra yield investors demand to hold Greek 10-year bonds instead of benchmark German bunds narrowed 97 basis points to 596 basis points. South Africa’s rand rose 0.9 percent against the dollar, while oil and tin led gains in commodities. Investor confidence is recovering after almost three- quarters of companies in the MSCI World Index and S&P 500 that reported earnings topped analysts’ estimates. European confidence in the economic outlook improved to the highest in more than two years, while U.S. jobless claims fell to a one- month low and German unemployment plunged. Fed policy makers restated a pledge yesterday to keep interest rates near zero for an extended period even as the labor market begins to improve. ‘Great So Far’ “The earnings season has been great so far,” said Hayes Miller , a Boston-based money manager at Baring Asset Management Inc., which oversees $46.1 billion. “That’s a good indication for the economy. 2010 looks pretty solid right now. In Europe, things are still on the table.” The S&P 500 has recovered three-quarters of its 2.3 percent plunge on April 27 when S&P cut Greece’s credit rating to junk and lowered Portugal by two steps. With the first-quarter earnings season past the half-way point, S&P 500 companies have beaten analysts’ estimates by an average of 17 percent on a per- share basis, according to data compiled by Bloomberg. Motorola, the largest U.S. mobile-phone maker, rallied 4.3 percent after forecasting second-quarter earnings that topped analysts’ estimates amid growing demand for models like the Droid. Aetna Inc. and Starwood Hotels & Resorts Worldwide Inc. were also among companies that climbed after reporting better- than-estimated earnings. Initial jobless claims fell by 11,000 to 448,000 in the week ended April 24, in line with the median forecast of economists surveyed by Bloomberg News and the lowest level in a month, Labor Department figures showed. The number of people receiving unemployment insurance and those getting extended payments decreased. Global Advance The Stoxx Europe 600 Index rallied 1.5 percent, with food and beverage companies leading gains. Unilever, the world’s second-largest food and detergent company, rallied 3.7 percent in Amsterdam after saying profit rose 33 percent. Pernod Ricard SA , the maker of Absolut vodka, climbed 2.9 percent in Paris after raising its forecast for full-year earnings. Siemens AG, Europe’s largest engineering company, advanced 1.7 percent in Frankfurt after profit topped estimates. The rand and Brazilian real rose at least 0.9 percent to lead gains among 14 of 16 major currencies against the dollar as investors bought currencies in countries with higher interest rates. Only the yen and Taiwanese dollar retreated. Brighter economic prospects in Asia and widening interest-rate differentials are likely to attract more capital, while bets for exchange-rate appreciation in the region may boost so-called carry trades, the IMF said in a report today. Euro Rebounds The euro strengthened 0.2 percent to $1.3249, after trading at $1.3115 yesterday, the lowest level in a year. Investors demanded an extra 5.96 percentage points in yield to buy Greece’s 10-year bonds rather than benchmark German bunds, after the difference in yield, or spread, widened to more than 8 percentage points yesterday. Greek Prime Minister George Papandreou began trying to persuade labor unions to accept further austerity measures as the nation tried to qualify for a rescue package worth as much as 120 billion euros ($159 billion). German Chancellor Angela Merkel said yesterday that the “stability of the euro zone” was at stake if a loan package for Greece can’t be delivered quickly. President Nicolas Sarkozy said France is “determined” to support the euro and Greece, while European Union Economic and Monetary Affairs Commissioner Olli Rehn today told reporters in Brussels that he is confident discussions on the aid package for Greece will conclude “in the next days.” Default Swaps The cost of insuring against default on European corporate bonds fell for the first time in four days. The Markit iTraxx Crossover Index of credit-default swaps on 50 mostly high-yield companies fell 18 basis points to 438 as of 3:02 p.m. in London, after yesterday climbing to the highest level since March 22, according to Markit Group Ltd. Contracts tied to Greece’s government debt dropped 97.5 basis points to 657, CMA DataVision prices show. Germany’s DAX Index jumped 1 percent as unemployment declined at the fastest pace in more than two years in April, the Nuremberg-based Federal Labor Agency said today. An index of executive and consumer sentiment in the 16 euro nations rose to 100.6 in April from a revised 97.9 in March, the European Commission in Brussels said today. Spanish 10-year bonds rose, cutting the yield by 6 basis points to 4.05 percent. The Italian 10-year bond yield fell 4 basis points to 4.06 percent even as the nation sold 8 billion euros ($11 billion) of securities due in 2012, 2017 and 2020. Tin for delivery in three months added 2.3 percent to $18,415 a metric ton on the London Metal Exchange, the steepest advance since February. Aluminum gained 1 percent, while gold fluctuated and crude oil added 2.6 percent to $85.38 a barrel in New York. To contact the reporters for this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Gavin Serkin at gserkin@bloomberg.net .

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Stocks Worldwide, Oil Rise on Earnings as Dollar Falls on Fed Rate Pledge

April 29, 2010

By Rita Nazareth and Gavin Serkin April 29 (Bloomberg) — Stocks rose as companies from Motorola Inc. to Unilever NV reported better-than-estimated earnings and European leaders moved closer to helping Greece. Higher-yielding currencies strengthened after the Federal Reserve pledged to keep interest rates at a record low. The Standard & Poor’s 500 Index rose 0.7 percent, while the Stoxx Europe 600 Index climbed 1.2 percent at 9:35 a.m. in New York. The ASE Index jumped 7.6 percent in Athens, the most since October 2008, as French President Nicolas Sarkozy said his nation is determined to help Greece. The extra yield investors demand to hold Greek 10-year bonds instead of benchmark German bunds narrowed 92 basis points to 601 basis points. South Africa’s rand rallied 0.9 percent against the dollar and crude oil and tin led gains in commodities. Investor confidence is recovering after almost three- quarters of companies in the MSCI World Index and S&P 500 that reported earnings topped analysts’ estimates. European confidence in the economic outlook improved to the highest in more than two years, while U.S. jobless claims fell to a one- month low and German unemployment plunged. Fed policy makers restated a pledge yesterday to keep interest rates near zero for an extended period even as the labor market begins to improve. “The Fed statement reassured people and nullified the impact of euro-area concerns,” said Brian Jackson , a senior emerging-markets strategist at RBC Capital Markets in Hong Kong. “It’s a case of the FOMC trumping Greece and Spain.” Earnings Season The S&P 500 has recovered more than half of its 2.3 percent plunge on April 27 when S&P cut Greece’s credit rating to junk and lowered Portugal by two steps. With the first-quarter earnings season past the half-way point, S&P 500 companies have beaten analysts’ estimates by an average of 20 percent on a per- share basis, according to data compiled by Bloomberg. Motorola, the largest U.S. mobile-phone maker, rallied 4.1 percent after forecasting second-quarter earnings that topped analysts’ estimates amid growing demand for models like the Droid. Aetna Inc. and Starwood Hotels & Resorts Worldwide Inc. were also among companies that climbed after reporting better- than-estimated earnings. Initial jobless claims fell by 11,000 to 448,000 in the week ended April 24, in line with the median forecast of economists surveyed by Bloomberg News and the lowest level in a month, Labor Department figures showed. The number of people receiving unemployment insurance and those getting extended payments decreased. Global Advance The MSCI World Index of 23 developed nations’ stocks rose 0.59 percent. Food and beverage stocks led gains in Europe as Unilever, the world’s second-largest food and detergent company, rallied 3.9 percent in Amsterdam after saying profit rose 33 percent. Pernod Ricard SA , the maker of Absolut vodka, rallied 3.2 percent in Paris after raising its forecast for full-year earnings. Siemens AG, Europe’s largest engineering company, advanced 0.4 percent in Frankfurt after profit topped estimates. The rand and Brazilian real rose at least 0.6 percent to lead gains among 14 of 16 major currencies against the dollar as investors bought currencies in countries with higher interest rates. Brighter economic prospects in Asia and widening interest-rate differentials are likely to attract more capital, while bets for exchange-rate appreciation in the region may boost so-called carry trades, the IMF said in a report today. The euro strengthened 0.1 percent to $1.3229, after trading at $1.3115 yesterday, the lowest level in a year. Investors demanded an extra 6 percentage points in yield to buy Greece’s 10-year bonds rather than benchmark German bunds, after the difference in yield, or spread, widened to more than 8 percentage points yesterday. Fastest Pace German unemployment declined at the fastest pace in more than two years in April, the Nuremberg-based Federal Labor Agency said today. An index of executive and consumer sentiment in the 16 euro nations rose to 100.6 in April from a revised 97.9 in March, the European Commission in Brussels said today. Spanish 10-year bonds rose, cutting the yield by 7 basis points to 4.04 percent. The Italian 10-year bond yield fell 3 basis points to 4.07 percent even as the nation sold 8 billion euros ($11 billion) of securities due in 2012, 2017 and 2020. Tin for delivery in three months added 2.1 percent to $18,375 a metric ton on the London Metal Exchange, the steepest advance since February. Aluminum also gained. Gold slipped 0.2 percent to $1,163.45 an ounce in London and crude oil added 1.8 percent to $84.68 a barrel in New York. To contact the reporters for this story: Gavin Serkin at gserkin@bloomberg.net .

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Stocks Worldwide, Oil Rise on Earnings as Dollar Falls on Fed Rate Pledge

April 29, 2010

By Rita Nazareth and Gavin Serkin April 29 (Bloomberg) — Stocks rose as companies from Motorola Inc. to Unilever NV reported better-than-estimated earnings and European leaders moved closer to helping Greece. Higher-yielding currencies strengthened after the Federal Reserve pledged to keep interest rates at a record low. The Standard & Poor’s 500 Index rose 0.7 percent, while the Stoxx Europe 600 Index climbed 1.2 percent at 9:35 a.m. in New York. The ASE Index jumped 7.6 percent in Athens, the most since October 2008, as French President Nicolas Sarkozy said his nation is determined to help Greece. The extra yield investors demand to hold Greek 10-year bonds instead of benchmark German bunds narrowed 92 basis points to 601 basis points. South Africa’s rand rallied 0.9 percent against the dollar and crude oil and tin led gains in commodities. Investor confidence is recovering after almost three- quarters of companies in the MSCI World Index and S&P 500 that reported earnings topped analysts’ estimates. European confidence in the economic outlook improved to the highest in more than two years, while U.S. jobless claims fell to a one- month low and German unemployment plunged. Fed policy makers restated a pledge yesterday to keep interest rates near zero for an extended period even as the labor market begins to improve. “The Fed statement reassured people and nullified the impact of euro-area concerns,” said Brian Jackson , a senior emerging-markets strategist at RBC Capital Markets in Hong Kong. “It’s a case of the FOMC trumping Greece and Spain.” Earnings Season The S&P 500 has recovered more than half of its 2.3 percent plunge on April 27 when S&P cut Greece’s credit rating to junk and lowered Portugal by two steps. With the first-quarter earnings season past the half-way point, S&P 500 companies have beaten analysts’ estimates by an average of 20 percent on a per- share basis, according to data compiled by Bloomberg. Motorola, the largest U.S. mobile-phone maker, rallied 4.1 percent after forecasting second-quarter earnings that topped analysts’ estimates amid growing demand for models like the Droid. Aetna Inc. and Starwood Hotels & Resorts Worldwide Inc. were also among companies that climbed after reporting better- than-estimated earnings. Initial jobless claims fell by 11,000 to 448,000 in the week ended April 24, in line with the median forecast of economists surveyed by Bloomberg News and the lowest level in a month, Labor Department figures showed. The number of people receiving unemployment insurance and those getting extended payments decreased. Global Advance The MSCI World Index of 23 developed nations’ stocks rose 0.59 percent. Food and beverage stocks led gains in Europe as Unilever, the world’s second-largest food and detergent company, rallied 3.9 percent in Amsterdam after saying profit rose 33 percent. Pernod Ricard SA , the maker of Absolut vodka, rallied 3.2 percent in Paris after raising its forecast for full-year earnings. Siemens AG, Europe’s largest engineering company, advanced 0.4 percent in Frankfurt after profit topped estimates. The rand and Brazilian real rose at least 0.6 percent to lead gains among 14 of 16 major currencies against the dollar as investors bought currencies in countries with higher interest rates. Brighter economic prospects in Asia and widening interest-rate differentials are likely to attract more capital, while bets for exchange-rate appreciation in the region may boost so-called carry trades, the IMF said in a report today. The euro strengthened 0.1 percent to $1.3229, after trading at $1.3115 yesterday, the lowest level in a year. Investors demanded an extra 6 percentage points in yield to buy Greece’s 10-year bonds rather than benchmark German bunds, after the difference in yield, or spread, widened to more than 8 percentage points yesterday. Fastest Pace German unemployment declined at the fastest pace in more than two years in April, the Nuremberg-based Federal Labor Agency said today. An index of executive and consumer sentiment in the 16 euro nations rose to 100.6 in April from a revised 97.9 in March, the European Commission in Brussels said today. Spanish 10-year bonds rose, cutting the yield by 7 basis points to 4.04 percent. The Italian 10-year bond yield fell 3 basis points to 4.07 percent even as the nation sold 8 billion euros ($11 billion) of securities due in 2012, 2017 and 2020. Tin for delivery in three months added 2.1 percent to $18,375 a metric ton on the London Metal Exchange, the steepest advance since February. Aluminum also gained. Gold slipped 0.2 percent to $1,163.45 an ounce in London and crude oil added 1.8 percent to $84.68 a barrel in New York. To contact the reporters for this story: Gavin Serkin at gserkin@bloomberg.net .

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AIDS Vaccine Advances Give Researcher New Hope

April 23, 2010

JOHANNESBURG — A leader in the search for a vaccine against HIV, which causes AIDS, said Friday that recent advances have given scientists new reason for hope. In an interview with The Associated Press, Dr. Alan Bernstein, executive director of the Global HIV Vaccine Enterprise, cited the world’s first successful test of an experimental AIDS vaccine. In September, researchers said the vaccine protected one in three people from getting HIV in a large study in Thailand. Bernstein also pointed to recent progress in determining whether people with HIV produce antibodies that could lead to a vaccine guarding against a variety of forms of HIV. He also said there is progress in mapping the many variations of what he called a “clever virus” that has so far eluded vaccine efforts because it kills some of the key cells needed to make a vaccine. “This is a very exciting time in the field,” Bernstein said. “A vaccine is possible, and we have the scientific tools now to turn that possibility into a reality.” Though he said the research effort has turned a corner after several setbacks, he cautioned a vaccine was still several years away. Others are far less optimistic. “I wish I could say I was. But I’m not,” said Salim Karim, director of the Centre for the AIDS Programme of Research in South Africa. “It’s proving to be a challenge that’s more complex than previously thought,” he said, adding he has spent 15 years researching a vaccine, and expected success to take at least another 15. Karim called the Thai study a “glimmer.” Scientists must now try to improve the vaccine so that it protects more than a third of the people who get it, and lasts for more than the six to 12 months it now appears to be effective. Questions have been raised about whether an HIV vaccine was possible, and even whether it made sense to devote time and energy to the pursuit. Bernstein said a comprehensive approach, that includes finding a vaccine, must be taken against AIDS. As head of an international group of major vaccine researchers and funders, Bernstein was in South Africa to discuss strategy with U.N. health and AIDS officials. South Africa, a country of some 50 million, has an estimated 5.7 million people infected with HIV, more than in any other country. In an announcement that marked a dramatic shift from the past, South African President Jacob Zuma pledged on World AIDS Day last year to embark on earlier and expanded treatment for HIV-positive South Africans. The program was to be formally launched this weekend. Bernstein said a vaccine would be particularly important for Africa, where prevention and treatment campaigns have proven costly. A vaccine, unlike an expensive lifetime regime of AIDS drugs, would be administered every few years. A vaccine “is the most effective public health measure we’ve come up with,” Bernstein said. The International AIDS Vaccine Initiative, which focuses on research into vaccines against strains of HIV that are prevalent in the developing world, says a vaccine must be part of a comprehensive solution. It says “no major viral epidemic has even been defeated without a vaccine.” According to a new report summarizing findings presented at a 2009 conference of vaccine researchers, the vaccine hunt is “steadily moving ahead,” though HIV presents tough challenges. The report in the May issue of The Lancet Infectious Diseases journal says that the massive, international effort to find an AIDS vaccine has had important side effects, providing information for the development of other vaccines and treatment for other diseases. Eds: CORRECTS in graf 2 that test was successful, not vaccine; RAISES quote from other expert.

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Stocks, Commodities Gain as Earnings Boost Economic Confidence; Yen Falls

April 20, 2010

By Rita Nazareth and David Merritt April 20 (Bloomberg) — Stocks rose, snapping a two-day drop for the MSCI World Index, and commodities gained as companies including Goldman Sachs Group Inc. reported better- than-estimated earnings and German investor confidence rose for the first time in seven months. The yen weakened. The Standard & Poor’s 500 Index gained 0.6 percent at 9:58 a.m. in New York, while the Stoxx Europe 600 Index rallied 1.5 percent and the MSCI gauge of equities in 23 developed nations climbed 0.8 percent. Copper rose for the first time in four days, while oil gained as European airspace began to reopen. The yen fell against all 16 of its most-traded counterparts, while the Canadian currency strengthened to parity against the dollar. Goldman Sachs, facing a fraud lawsuit from U.S. regulators, said first-quarter earnings surged 91 percent after fixed-income trading revenue rose to a record. The Mannheim-based ZEW Center for European Economic Research said its index of investor and analyst expectations increased to 53 from 44.5 in March, while Federal Reserve Bank of Chicago President Charles Evans said late yesterday that the U.S. recession is “definitely over.” “Quarterly earnings season has started well,” said Antony Gifford , a London-based manager at Henderson Global Investors, which oversees $87 billion. “Bar any macro shock, this rise could be sustainable for a while yet.” Goldman Sachs gained as much as 2.1 percent before paring gains. First-quarter net income almost doubled to $3.46 billion, or $5.59 a share, on record fixed-income trading revenue. The bank’s shares rose yesterday after Bloomberg News reported that the Securities and Exchange Commission’s vote to sue the firm was split along party lines. The U.K. Financial Services Authority also started a formal investigation. Earnings Watch More than 83 percent of S&P 500 companies that have reported first-quarter results beat the average analyst earnings estimate, according to data compiled by Bloomberg. When 79.5 percent topped projections in the fourth quarter of 2009, it was the biggest proportion in Bloomberg data going back to 1993. The MSCI World Index of 23 developed nations’ stocks rose 0.7 percent. Automaker shares were the biggest gainers in Europe, led by Daimler AG , the world’s second-biggest maker of luxury vehicles, which surged 7.5 percent in Frankfurt after lifting its profit forecasts. SABMiller Plc rose 4.1 percent in London after reporting an unexpected increase in lager sales. Novartis advanced 1.3 percent in Zurich after reporting profit that beat analysts’ estimates. Deutsche Lufthansa AG rose 1.8 percent in Frankfurt as European airspace that had been closed by the volcanic eruption in Iceland started to reopen. Asian Shares The MSCI Asia Pacific Index advanced 0.5 percent to rebound from yesterday’s 2.1 percent drop, its biggest slump since Feb. 19. Financial shares were the biggest contributors to the gauge’s advance as Morgan Stanley upgraded Japan’s banks. Isuzu Motors Ltd. rose 4.6 percent in Tokyo after reporting better- than-expected full-year profit. The MSCI Emerging Markets Index rallied from its biggest decline in more than two months, climbing 1.2 percent. Thailand’s SET Index surged 5.4 percent, the most since January 2009, as anti-government protesters canceled a planned march after failing to attract large crowds. Canada led gains against the dollar, rising 1.5 percent to exceed parity versus the U.S. currency. Australia’s dollar and the South Africa rand strengthened at least 0.6 percent against the dollar. The yen dropped 0.8 percent against the dollar and lost 0.6 percent versus the euro as demand for the relative safety of the Japanese currency waned. The Australian dollar appreciated against 15 of 16 of its most-traded peers after minutes of the central bank’s April 6 meeting showed policy makers expressed concern that a mining boom will stoke inflation. Greek-German Spread Declines for Greek bonds drove the yield premium that investors demand to hold the nation’s 10-year debt instead of benchmark German bunds to 467 basis points, the most since 1998, amid concern the nation will have to tap a European Union- brokered bailout package to avoid a default. Germany is Europe’s largest economy and a wider yield spread compared with its bonds signifies decreasing confidence in Greek debt. Greece sold 1.95 billion euros ($2.6 billion) of 3.65 percent three-month bills today. U.K bonds fell as a report showed inflation accelerated last month to above the Bank of England’s 3 percent limit, pushing 10-year yields up 3 basis points to 4.01 percent. Copper for delivery in three months rallied 1.7 percent to $7,826 a metric ton on the London Metal Exchange. Aluminum, nickel and tin also gained. Gold for immediate delivery rose 0.7 percent to $1,143.50 an ounce. Crude oil for May delivery advanced 1.5 percent to $82.68 a barrel in New York trading. A benchmark indicator of U.S. corporate credit risk fell, snapping two days of advances. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 2.1 basis points to a mid-price of 86.2 basis points, according to Markit Group Ltd. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net .

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Stocks, Commodities Rebound on Economic, Earnings Confidence; Yen Declines

April 20, 2010

By David Merritt April 20 (Bloomberg) — Stocks rose, snapping a two-day drop for the Stoxx Europe 600 Index, and commodities gained as German investor confidence rose for the first time in seven months and Novartis AG reported better-than-estimated earnings. The yen weakened. The Stoxx 600 rallied 0.7 percent as of 10:52 a.m. in London while the MSCI Emerging Market Index climbed 0.9 percent and futures on the Standard & Poor’s 500 Index gained 0.1 percent. Novartis advanced 1.3 percent in Zurich. Copper rose for the first time in four days and oil gained. The yen declined against all 16 of its most-traded counterparts. Greece’s bonds fell, with the yield premium to benchmark bunds widening to a record. The Mannheim-based ZEW Center for European Economic Research said its index of investor and analyst expectations increased to 53 from 44.5 in March. Federal Reserve Bank of Chicago President Charles Evans said late yesterday that the U.S. recession is “definitely over,” while 26 of the 28 companies in the S&P 500 that have reported quarterly results since April 12 beat analyst estimates, according to data compiled by Bloomberg. “Quarterly earnings season has started well,” said Antony Gifford , a London-based manager at Henderson Global Investors, which oversees $87 billion. “Bar any macro shock, this rise could be sustainable for a while yet.” Goldman Sachs Group Inc. rose 1.3 percent in German trading even as the U.K. Financial Services Authority started a formal investigation into the firm following the U.S. Securities and Exchange Commission’s allegations of fraud. Wall Street’s most profitable securities firm is due to report earnings at 7 a.m. in New York. MSCI World Index The MSCI World Index of 23 developed nations’ stocks rose 0.3 percent. Automaker shares were the biggest gainers in Europe, led by Daimler AG , the world’s second-biggest maker of luxury vehicles, which surged 6.8 percent in Frankfurt after lifting its profit forecasts. SABMiller Plc rose 3.6 percent in London after reporting an unexpected increase in lager sales. Deutsche Lufthansa AG rose 0.9 percent in Frankfurt as European airspace that had been closed by the volcanic eruption in Iceland started to reopen. The MSCI Asia Pacific Index advanced 0.5 percent, rebounding from yesterday’s worst slump since Feb. 19. Finance shares were the biggest contributors to the gauge’s advance as Morgan Stanley upgraded Japan’s banks. PT Bank Danamon Indonesia jumped 6.7 percent in Jakarta on speculation it will report higher profit today. Isuzu Motors Ltd. rose 4.6 percent in Tokyo after reporting better-than-expected full-year profit. U.S. Futures U.S. futures signalled the S&P 500 may extend its 0.5 percent rally yesterday. Coco Cola Co. and Johnson & Johnson are among 30 companies in the index scheduled to report earnings today. The MSCI Emerging Markets Index rallied from its biggest decline in more than two months, climbing 0.9 percent. Thailand’s SET Index surged 5 percent, the most since January 2009, as anti-government protesters canceled a planned march after failing to attract large crowds. South Africa’s rand strengthened 0.4 percent against the dollar. The yen dropped 0.4 percent against the dollar and lost 0.6 percent versus the euro as demand for the relative safety of the Japanese currency waned. The Australian dollar appreciated against all 16 of its most-traded peers after minutes of the central bank’s April 6 meeting showed policy makers expressed concern that a mining boom will stoke inflation. Greek-German Spread Declines for Greek bonds drove the yield premium that investors demand to hold the nation’s 10-year debt instead of benchmark German bunds to 471 basis points, the most since Bloomberg began collating the data, amid concern the nation will have to tap a European Union-brokered bailout package to avoid a default. Greece sold 1.95 billion euros ($2.6 billion) of 3.65 percent three-month bills today. Gilts fell as a report showed U.K. inflation accelerated last month to above the Bank of England’s 3 percent limit, pushing 10-year yields up 3 basis points to 4.03 percent. The pound stayed higher against the dollar, strengthening 0.4 percent on the day to $1.5396. Consumer prices rose 3.4 percent in March from a year earlier, the statistics office in London said today, more than economists’ 3.1 percent prediction. Copper for delivery in three months added 1.2 percent to $7,786.25 a metric ton on the London Metal Exchange. Aluminum, nickel and tin also gained. Gold for immediate delivery rose 0.8 percent to $1,142.47 an ounce. Crude oil for May delivery advanced 1.3 percent to $82.50 a barrel in New York trading. The cost of protecting against non-payment on corporate bonds using credit-default swaps fell, with contracts on the Markit iTraxx Crossover Index of 50 mostly high-yield European companies dropping 13 basis points to 415, according to Markit Group Ltd. prices. The decline signals an improvement in investor perceptions of credit quality. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net

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Harmony Gold to close 3 shafts in South Africa

April 18, 2010

Harmony Gold to close 3 shafts in South Africa

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Yen Advances as Speculation About China, Greece Spurs Demand for Safety

April 17, 2010

By Ben Levisohn April 17 (Bloomberg) — The yen advanced against all of its most-traded counterparts as speculation China may take further steps to slow its economy and Greece may trigger a $61 billion rescue package spurred demand for relative safety. The dollar dropped for two straight weeks against the yen for the first time since January after Goldman Sachs Group Inc. was charged with fraud, making U.S. stocks less attractive. Canada’s dollar fell against the greenback for the first time in three weeks after touching parity for a second week before the Bank of Canada’s policy meeting on April 20. “The Greece story isn’t going away soon, and we expect further tightening from China,” said Vassili Serebriakov , a strategist at Wells Fargo & Co. in New York. “That’s triggered some caution in the market, and that’s why you’re seeing the yen doing better.” The yen gained 1.1 percent to 124.44 per euro yesterday, from 125.79 on April 9. Japan’s currency appreciated 1.1 percent to 92.17 against the dollar, from 93.18. It advanced to 91.91 yesterday, the strongest level since March 25. The euro was little changed at $1.3503, compared with $1.35. The dollar dropped to the lowest level against the yen in almost a month as Goldman Sachs was sued by the Securities and Exchange Commission for fraud related to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression. The charges “are completely unfounded,” Goldman Sachs said in a statement. ‘Riveted’ on Goldman “The Goldman news has people riveted,” said Firas Askari , head currency trader in Toronto at Bank of Montreal, Canada’s fourth-largest lender. “Risk off.” The Standard & Poor’s 500 Index erased its weekly gain, ending the week down 0.2 percent. Crude oil dropped 2.3 percent this week, the most since the five days ended Jan. 22. New Zealand’s dollar slid 2.1 percent to 65.31 yen this week and Australia’s currency lost 2 percent to 85.18 yen on speculation investors will reduce carry trades, in which they buy higher-yielding assets with amounts borrowed in nations with low interest rates. Japan’s benchmark of 0.1 percent has made the yen popular for funding such transactions. Twelve-month non-deliverable yuan forwards finished the week at 6.6185 per dollar, indicating traders bet China’s currency may gain 3 percent in the next 12 months. China has pegged the yuan at about 6.83 since July 2008, after allowing it to rise 21 percent in the previous three years. China’s cabinet raised minimum mortgage rates and down- payment ratios for some home purchases, saying “more forceful” steps are needed to cool speculation after property prices rose at a record pace in March. ‘Prudent Policy’ “It’s what China needs to do and should do,” said Alan Ruskin , head of currency strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “This is prudent policy to achieve sustained growth over the cycle.” The nation’s economy grew 11.9 percent from a year earlier in the biggest gain since the second quarter of 2007, the statistics bureau said this week. Singapore’s dollar rallied the most against the greenback in six months, appreciating 1 percent to S$1.3756 as its central bank unexpectedly revalued its currency after the government raised forecasts for economic growth and inflation. The Monetary Authority said it will seek a “modest and gradual appreciation” in the local dollar and shift to a stronger range for currency fluctuations, the first such combined move in its 39-year history. Greece Talks The euro fell for a second straight week versus the yen before talks on Greece involving the European Union, the International Monetary Fund and the European Central Bank that are scheduled to begin on April 19. European finance ministers offered as much as 30 billion euros ($41 billion) in three-year loans in 2010 at about 5 percent, compared with the three-year Greek bond yield of 7.21 percent. Another 15 billion euros would come from the International Monetary Fund. “I see Greece doing the sensible thing and turning its back on the bond market,” said Andrew Wilkinson , senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut. “We say take it at 5 percent.” Canada’s dollar slid 1 percent to C$1.0128 versus the greenback this week after trading at 99.54 Canadian cents versus the dollar on April 14, the strongest level since June 2008. The Bank of Canada will meet April 20 to decide on interest rates. Governor Mark Carney signaled last month he’s open to raising the target lending rate as soon as June 1 as inflation and growth outpace forecasts. South Africa’s rand was the biggest loser versus the dollar, declining 1.8 percent to 7.390 on speculation the nation’s central bank will lower its target lending rate, now at 6.5 percent. The nation’s retail sales unexpectedly contracted for a 13th month in February, a report showed this week. To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net

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South Africa’s Escom gets $3.75b loan from WB

April 11, 2010

South Africa’s Escom gets $3.75b loan from WB

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Ford Motor Deploys Renewed Profits to Chase GM, Toyota in Emerging Markets

April 9, 2010

By Jeff Green April 9 (Bloomberg) — Ford Motor Co. , profitable last year for the first time since 2005, is stepping up spending in fast- growing markets in South America and South Africa to help catch up to General Motors Co. and Toyota Motor Corp. “Ford was very, very unhealthy just a few years ago, but now they are able to start investing again,” Rebecca Lindland , an IHS Global Insight Inc. forecaster, said in an interview today. “The places they are investing are seen as the growth markets.” Spending to retool factories will increase by $207 million in South Africa, $282 million in Brazil and $250 million in Argentina, Ford said this week. Industrywide global sales may rise 4 percent to 66.9 million autos in 2010, researcher J.D. Power & Associates estimates. After shunning a U.S. bailout and avoiding bankruptcy, Ford reported $2.7 billion in net income in 2009, ending losses totaling $30 billion in the three previous years. Capital spending may increase $1 billion in 2010, Chief Financial Officer Lewis Booth said in a February interview. “Despite being a top-five automaker in the world, Ford trails the top players such as Volkswagen and GM in many emerging markets,” said Brian Johnson , a Barclays Capital analyst, who rates Dearborn, Michigan-based Ford “equal weight.” Ford has about half the sales of GM, Volkswagen AG and Fiat SpA in South America and is well behind in South Africa, said Johnson, who is based in Chicago. Toyota is the world’s largest automaker. Ford rose 9 cents to $12.72 in New York Stock Exchange composite trading . The shares have gained 27 percent this year after surging more than fourfold in 2009. About 46 percent of Ford’s $118.3 billion in 2009 revenue came from outside North America. Ford’s 7.45 percent notes due in July 2031 rose 0.625 cent to 93 cents on the dollar in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Overseas Investments The $739 million in new spending in South Africa and South America follows investments of at least $1.49 billion spread among China, India and Thailand to bolster sales in Asia. Deliveries in Asia may increase 9 percent this year to 25.9 million vehicles, led by 12 percent growth in India and 8 percent in China, according to Westlake Village, California- based J.D. Power said. South Africa may post a 14 percent gain this year, according to Lexington, Massachusetts-based IHS Global Insight. Ford will upgrade and expand its assembly plant in the South African capital, Pretoria, and its engine factory in Port Elizabeth, according to a statement yesterday. The 3 billion rand ($415 million) investment will boost annual capacity at the Pretoria factory to 110,000 vehicles, with two-thirds expected to be exported to countries in Africa and Europe, Ford said. Production on a new compact pickup truck is scheduled to start next year, Ford said. South America Auto sales may rise 15 percent this year in South America, J.D. Power projected. Brazilian sales may rise 12 percent this year to push the country past Germany as the world’s fourth- largest auto market, after China, the U.S. and Japan, J.D. Power projected. Ford is investing $3 billion in the region through 2015. Chief Executive Officer Alan Mulally said yesterday in Brazilia that Ford will spend 500 million reais more than planned in Brazil from 2011 through 2015, pushing the total to 4.5 billion reais ($2.54 billion). Ford is developing a small sport-utility vehicle there for domestic sales and for export, its first Brazil-engineered model to be sold outside the country. Capital spending at the automaker is expected to be in the range of $4.5 billion to $5 billion this year, Controller Bob Shanks said in a conference call with investors last week. Building less-expensive vehicles on the same platforms worldwide saves money that Ford can use to expand output and allows for exports to more markets, Johnson, the Barclays analyst, said in an interview. “This is where their plans start to pay off,” he said. To contact the reporter on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net

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Ford Motor Deploys Renewed Profits to Chase GM, Toyota in Emerging Markets

April 9, 2010

By Jeff Green April 9 (Bloomberg) — Ford Motor Co. , profitable last year for the first time since 2005, is stepping up spending in fast- growing markets in South America and South Africa to help catch up to General Motors Co. and Toyota Motor Corp. “Ford was very, very unhealthy just a few years ago, but now they are able to start investing again,” Rebecca Lindland , an IHS Global Insight Inc. forecaster, said in an interview today. “The places they are investing are seen as the growth markets.” Spending to retool factories will increase by $207 million in South Africa, $282 million in Brazil and $250 million in Argentina, Ford said this week. Industrywide global sales may rise 4 percent to 66.9 million autos in 2010, researcher J.D. Power & Associates estimates. After shunning a U.S. bailout and avoiding bankruptcy, Ford reported $2.7 billion in net income in 2009, ending losses totaling $30 billion in the three previous years. Capital spending may increase $1 billion in 2010, Chief Financial Officer Lewis Booth said in a February interview. “Despite being a top-five automaker in the world, Ford trails the top players such as Volkswagen and GM in many emerging markets,” said Brian Johnson , a Barclays Capital analyst, who rates Dearborn, Michigan-based Ford “equal weight.” Ford has about half the sales of GM, Volkswagen AG and Fiat SpA in South America and is well behind in South Africa, said Johnson, who is based in Chicago. Toyota is the world’s largest automaker. Ford rose 9 cents to $12.72 in New York Stock Exchange composite trading . The shares have gained 27 percent this year after surging more than fourfold in 2009. About 46 percent of Ford’s $118.3 billion in 2009 revenue came from outside North America. Ford’s 7.45 percent notes due in July 2031 rose 0.625 cent to 93 cents on the dollar in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Overseas Investments The $739 million in new spending in South Africa and South America follows investments of at least $1.49 billion spread among China, India and Thailand to bolster sales in Asia. Deliveries in Asia may increase 9 percent this year to 25.9 million vehicles, led by 12 percent growth in India and 8 percent in China, according to Westlake Village, California- based J.D. Power said. South Africa may post a 14 percent gain this year, according to Lexington, Massachusetts-based IHS Global Insight. Ford will upgrade and expand its assembly plant in the South African capital, Pretoria, and its engine factory in Port Elizabeth, according to a statement yesterday. The 3 billion rand ($415 million) investment will boost annual capacity at the Pretoria factory to 110,000 vehicles, with two-thirds expected to be exported to countries in Africa and Europe, Ford said. Production on a new compact pickup truck is scheduled to start next year, Ford said. South America Auto sales may rise 15 percent this year in South America, J.D. Power projected. Brazilian sales may rise 12 percent this year to push the country past Germany as the world’s fourth- largest auto market, after China, the U.S. and Japan, J.D. Power projected. Ford is investing $3 billion in the region through 2015. Chief Executive Officer Alan Mulally said yesterday in Brazilia that Ford will spend 500 million reais more than planned in Brazil from 2011 through 2015, pushing the total to 4.5 billion reais ($2.54 billion). Ford is developing a small sport-utility vehicle there for domestic sales and for export, its first Brazil-engineered model to be sold outside the country. Capital spending at the automaker is expected to be in the range of $4.5 billion to $5 billion this year, Controller Bob Shanks said in a conference call with investors last week. Building less-expensive vehicles on the same platforms worldwide saves money that Ford can use to expand output and allows for exports to more markets, Johnson, the Barclays analyst, said in an interview. “This is where their plans start to pay off,” he said. To contact the reporter on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net

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France Telecom May Invest Up to $9.3 Billion on Africa, Middle East Deals

April 8, 2010

By Matthew Campbell April 8 (Bloomberg) — France Telecom SA may invest as much as 7 billion euros ($9.3 billion) in deals focused on Africa and the Middle East in the next five years, Chief Executive Officer Stephane Richard said. The investment would be part of a plan to double revenue from emerging markets, Richard said in an interview in Paris yesterday. Emerging markets currently account for about 3.3 billion euros of revenue at France’s largest phone company, or about 7 percent of total sales of about 46 billion euros. “If we can buy a portfolio of assets to arrive more rapidly, that’s very good,” Richard said. “If it’s necessary to buy licenses country by country, that works also.” Some of the world’s biggest mobile-phone operators, including Vodafone Group Plc of the U.K., are looking for growth in Africa as revenue gains from their home markets slow. Last month, India’s Bharti Airtel Ltd . agreed to buy assets in 15 African countries from Zain , Kuwait’s largest operator, for $9 billion. “A doubling of activity in five years supposes that we find 2 billion euros more in revenue,” through new licenses or asset acquisitions, with another billion euros coming from internal growth by the end of the period, Richard said. For the acquisitions, paying multiples similar to the transaction between Zain and Bharti would be about 2.5 times or even three times revenue, he said. “Therefore we have about five or six billion euros, or even seven” billion euros that could be invested, he added. ‘Regional Cluster’ France Telecom fell as much as 1.6 percent in Paris trading, the biggest intraday slide in almost two months. It slid 1.5 percent to 17.31 euros at 11:19 a.m., giving the company a market value of about 46 billion euros. External growth in Africa and the Middle East will come from the purchase of licenses or of assets including some that could cover multiple countries, Richard said. “It’s definitely welcome news for the new CEO to re- iterate that growth outside of France and in Africa is still a priority,” said Michael Kovacocy , an analyst at Daiwa Capital Markets in London. “I would say maybe even more money could be spent in Africa over the medium and long term. If anything, he’s playing it safe.” Richard took over as CEO on March 1, replacing Didier Lombard , who remains the company’s chairman. France Telecom is focused on filling gaps in West Africa, where it has operations in countries including Cameroon, Senegal and Niger, he said. “All of the countries in this zone where we aren’t at present interest us,” Richard said. “There’s logic in having a regional cluster.” Bharti Assets Richard said he would consider any operations Bharti might choose to sell from the portfolio of assets it has just acquired from Zain. “It’s certain we’ll look at it,” Richard said, adding that “the ink on the deal is barely dry, so it’s not the moment for discussions.” France Telecom had free cash flow of 8.3 billion euros at the end of last year. The company also has projected cash flow of 8 billion euros for this year and next and plans to use some of that on acquisitions, Richard said. Africa has a mobile penetration rate of less than 45 percent, presenting opportunities for “tremendous growth” in customer numbers, Informa Telecoms & Media analysts including Nick Jotischky said in a research report. In most European countries the penetration rate is over 100 percent, meaning that the number of SIM cards in circulation is greater than the population. Vivendi SA, whose SFR mobile-phone service is France’s second-largest, is expanding in Africa through its Maroc Telecom unit, while South Africa’s MTN Group Ltd . is the regional market leader. To contact the reporter on this story: Matthew Campbell in Paris via mcampbell39@bloomberg.net .

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Emerging-Market Stocks Climb to 10-Week High; Greek Bonds Drop After Sale

March 30, 2010

By Gavin Serkin March 30 (Bloomberg) — Emerging-market stocks rose to a 10-week high as oil traded above $82 a barrel on speculation the world economic recovery is strengthening, while Greek stocks and bonds fell after the government sold debt. The MSCI Emerging Markets Index climbed 0.5 percent at 10:30 a.m. in London and the MSCI World Index of stocks in 23 developed markets rose for a fourth day. Futures on the Standard & Poor’s 500 Index were little changed. Crude oil held above $82 a barrel in New York trading. Greece’s seven-year notes sold yesterday lost value compared with German bunds. U.S. payrolls may have increased by the most in three years in March, according to a Bloomberg survey of economists before a government report April 2, and consumer spending rose in February for a fifth month. Britain’s economy grew faster than economists had predicted in the fourth quarter, while Ireland was scheduled to announce plans to buy banks’ toxic assets. “The market is looking for an excuse to buy risk,” Jim Reid , a strategist at Deutsche Bank AG in London, wrote in a research note. “We will keep a close eye on developments in Ireland and its banking sector. Greece is still paying a high price for funding which will make its ongoing fiscal consolidation efforts more difficult.” Dubai, Romania Dubai’s DFM General rallied 1 percent while Romania’s BET index rose 0.7 percent and South Africa’s FTSE/JSE Africa All Share Index climbed 0.7 percent. The ruble gained 0.6 percent to the highest level in a week against the dollar as yesterday’s gain in oil prices improved the outlook for the world’s biggest energy exporter. South Korea’s won climbed for a third day, the longest winning streak in three weeks, on speculation the nation’s improving economy will spur overseas demand for assets. The MSCI Asia Pacific Index climbed 1 percent to a 10-week high, the Shanghai Composite Index rose 0.2 percent and the Hang Seng China Enterprises Index of Hong Kong-traded shares jumped 1.6 percent. The Stoxx Europe 600 Index rose 0.3 percent as people with knowledge of the situation said UBS AG , Switzerland’s biggest bank by client assets, generated about $2.3 billion of fixed- income revenue in the first quarter. Allied Irish Banks Plc plummeted 15 percent in Dublin for the biggest two-day drop in a year before a government report on bank capital requirements. U.S. Futures Futures on the S&P 500 gained 0.1 percent before reports on U.S. home prices and consumer confidence. The S&P/Case-Shiller index of property values in 20 cities may have dropped 0.3 percent in January from a month earlier on a seasonally adjusted basis, according to the median forecast of 18 economists surveyed by Bloomberg News. The New York-based Conference Board’s sentiment index probably climbed to 51 in March from 46 last month. Credit-default swaps on Greek sovereign debt rose for a second day, climbing 11 basis points to 327.5, the highest in a week, according to CMA DataVision. Swaps on Ireland increased 1 basis point to 135.5, Spain was 2 higher at 114.5 and Portugal advanced 1 basis point to 135.5. The yield premium on the Greek seven-year security widened about 5 basis points to 339 basis points over benchmark German debt, according to ING Groep NV prices on Bloomberg. The 10-year Greek bond yield jumped 15 basis points to 6.47 percent, and the difference in yield, or spread , with benchmark 10-year bunds widened 14 basis points to 330 basis points, based on Bloomberg generic prices. Copper for delivery in three months fell 0.3 percent to $7,744.75 a metric ton on the London Metal Exchange. Gold added 0.1 percent to $1,110.85 an ounce. The dollar traded near a one-week low against the euro as mounting evidence the global economy is improving damped demand for the perceived safety of the U.S. currency. The pound climbed against all 16 of its most-traded peers after the report showing the U.K. economy expanded 0.4 percent. To contact the reporter for this story: Gavin Serkin at gserkin@bloomberg.net

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British Airways Stock Gains Show Investors Back Walsh’s `Hardball’ Stance

March 24, 2010

By Steven Rothwell March 24 (Bloomberg) — British Airways Plc Chief Executive Officer Willie Walsh may have little incentive to halt the resumption of a strike by cabin crew this weekend as costs are masked by a record 600 million-pound ($893 million) annual loss. With thousands of customers already lost to British Airways part-way through the seven-day walkout by 12,000 crew members and expenses from renting planes to provide a truncated service unlikely to be refunded, Walsh may have more to lose from giving ground to secure a swift deal, investors and analysts said. Costs from the airline’s first strike since 1997, which amounted to 21 million pounds in the first three days, will be dwarfed by the pretax loss for the year that ends on March 31. BA’s recent share performance has also eased pressure for a return to talks, with the stock up 17 percent since Feb. 22, when the Unite union revealed crews had backed a walkout. “Shareholders are supporting Walsh’s decision to play hardball,” said Greg Bennett , who helps oversee more than 1 billion pounds at Marlborough Fund Managers in Durban, South Africa, including stock of London-based BA. “If he succeeds in curtailing the union’s power that would be a very significant victory given the bloated nature of cabin-crew costs.” TUC Efforts Efforts to broker a return to negotiations by Trades Union Congress General Secretary Brendan Barber have so far failed, Liz Chinchen , a spokeswoman for the TUC, Britain’s umbrella organization for labor groups, said today in a phone interview. Barber is “keeping up a dialogue,” she said. Unite General Secretary Tony Woodley said March 22 he doesn’t expect Walsh to agree to discussions before the strike resumes for four days on March 27. BA says its open to a talks at any time. The airline aims to run all services from London’s Gatwick and City airports during the next walkout. About 70 percent of long-haul flights from Heathrow airport will also operate, together with up to 55 percent of European services. British Airways says it transported about 60 percent of passengers holding prior bookings during the first three days of the walkout that began on March 20. The carrier scrapped 18 out of 318 flights from its Heathrow hub today, or 6 percent of the schedule, according to its Website, after the strike left planes and staff out of position. Seven days of stoppages may cost BA 105 million pounds, including expenses from the rental of planes to boost services, according to Citigroup Inc. analyst Andrew Light . That’s more than the 63 million-pound annual saving Walsh was seeking in a deal, but less than one-fifth of BA’s pretax-loss estimate, which envisages a 1 billion pounds sales drop this fiscal year. ‘Almost Trivial’ “The cost of the strike in the context of the recession is almost trivial,” said Nick Cunningham , an analyst at Evolution Securities in London with a “ buy ” rating on the carrier’s stock. “At the bottom of the cycle BA isn’t making that much money anyway. Later on, when we’re into a full-blown recovery, a strike would be much more damaging, because they’ll be flying a higher level of volume.” Negotiations with Unite broke down after three days last week when Walsh presented a proposal he acknowledged was less attractive than previous offers, saying it had been modified to take account of expenses during the impending strike. BA is open to a “sensible settlement,” Walsh said in a statement yesterday. Woodley said yesterday he’s open to negotiations with the company “at any time.” An assessment of the cost of future industrial action can only be made after the event and BA’s full-year earnings estimate therefore remains “broadly unchanged,” the carrier said March 22 after markets closed. ‘One-Off Cost’ “BA seems resigned to facing the short-term losses in order to secure changes in working practices and cost savings in the longer term,” said Jonathan Wober , an analyst at Societe Generale SA in London with a “hold” rating on the stock. “Investors seem to be regarding this as a one-off cost, as long as the results that are realized are in management’s favor.” British Airways shares were trading little changed at 245.5 pence as of 1:34 p.m. in London and have gained 31 percent this year for a market value of 2.83 billion pounds. That’s the second-best performance on the eight-member Bloomberg EMEA Airlines Index , which has advanced 3 percent. Air France-KLM Group, Europe’s largest airline, has added 2.9 percent and Deutsche Lufthansa AG, the No. 2, is up 4.2 percent. AMR, Iberia Gains at BA have been spurred by preliminary approval from regulators for a pact with AMR Corp.’s American Airlines and a pension agreement with employees that should ease the way for a merger with Iberia Lineas Aereas de Espana SA of Spain. Iberia’s board is scheduled to meet tomorrow, with a definitive agreement to be signed by the end of this month. “The stock market is all about looking forward,” said Marlborough’s Bennett. “Combine cost cuts from cabin crew with what comes next with Iberia and American and that puts British Airways in a much better position.” BA’s “strong balance sheet” also stands it in good stead to take on Unite, Bennett said. Liquidity at Europe’s third- biggest airline “remains satisfactory,” with a cash balance of 1.6 billion pounds as of December, Moody’s Investors Service said in a note on March 18. The board of British Airways supports the strategy being pursued by Walsh, spokeswoman Dayna Ward said in an interview this week, citing comments from Chairman Martin Broughton . Unite’s Woodley had appealed for directors to step in and help resolve the dispute after talks collapsed on March 19. “I don’t expect them to negotiate between now and Saturday,” Woodley said March 22 after a rally near Heathrow. Lost Custom Still, a prolonged strike could pose a “competitive risk” for BA and hurt the carrier’s market share as customers switch to other airlines, said Yan Derocles , a Paris-based analyst at Oddo Securities with a “reduce” rating on the stock. Virgin Atlantic Airways Ltd. has reported increased bookings while BMI, the second-largest operator at Heathrow, will add 4,500 seats during the second phase of the strike. Justin Urquhart Stewart , who oversees about $3.3 billion at 7 Investment Management in London, said the dispute is still negative for BA and that the two sides should “get rid of the ego in the dispute” and return to talks. “They’ve got to find a face-saving way of getting out of this,” said Urquhart Stewart, who holds BA shares through an Exchange Traded Fund. “The cost structure at BA needs to be changed, but with everybody getting involved — the government and opposition included — the two sides are getting pushed into a position where they’ll find it very difficult to back down.” To contact the reporter on this story: Steven Rothwell in London at srothwell@bloomberg.net

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British Airways Stock Gains Show Investors Back Walsh’s `Hardball’ Stance

March 24, 2010

By Steven Rothwell March 24 (Bloomberg) — British Airways Plc Chief Executive Officer Willie Walsh may have little incentive to halt the resumption of a strike by cabin crew this weekend as costs are masked by a record 600 million-pound ($893 million) annual loss. With thousands of customers already lost to British Airways part-way through the seven-day walkout by 12,000 crew members and expenses from renting planes to provide a truncated service unlikely to be refunded, Walsh may have more to lose from giving ground to secure a swift deal, investors and analysts said. Costs from the airline’s first strike since 1997, which amounted to 21 million pounds in the first three days, will be dwarfed by the pretax loss for the year that ends on March 31. BA’s recent share performance has also eased pressure for a return to talks, with the stock up 17 percent since Feb. 22, when the Unite union revealed crews had backed a walkout. “Shareholders are supporting Walsh’s decision to play hardball,” said Greg Bennett , who helps oversee more than 1 billion pounds at Marlborough Fund Managers in Durban, South Africa, including stock of London-based BA. “If he succeeds in curtailing the union’s power that would be a very significant victory given the bloated nature of cabin-crew costs.” TUC Efforts Efforts to broker a return to negotiations by Trades Union Congress General Secretary Brendan Barber have so far failed, Liz Chinchen , a spokeswoman for the TUC, Britain’s umbrella organization for labor groups, said today in a phone interview. Barber is “keeping up a dialogue,” she said. Unite General Secretary Tony Woodley said March 22 he doesn’t expect Walsh to agree to discussions before the strike resumes for four days on March 27. BA says its open to a talks at any time. The airline aims to run all services from London’s Gatwick and City airports during the next walkout. About 70 percent of long-haul flights from Heathrow airport will also operate, together with up to 55 percent of European services. British Airways says it transported about 60 percent of passengers holding prior bookings during the first three days of the walkout that began on March 20. The carrier scrapped 18 out of 318 flights from its Heathrow hub today, or 6 percent of the schedule, according to its Website, after the strike left planes and staff out of position. Seven days of stoppages may cost BA 105 million pounds, including expenses from the rental of planes to boost services, according to Citigroup Inc. analyst Andrew Light . That’s more than the 63 million-pound annual saving Walsh was seeking in a deal, but less than one-fifth of BA’s pretax-loss estimate, which envisages a 1 billion pounds sales drop this fiscal year. ‘Almost Trivial’ “The cost of the strike in the context of the recession is almost trivial,” said Nick Cunningham , an analyst at Evolution Securities in London with a “ buy ” rating on the carrier’s stock. “At the bottom of the cycle BA isn’t making that much money anyway. Later on, when we’re into a full-blown recovery, a strike would be much more damaging, because they’ll be flying a higher level of volume.” Negotiations with Unite broke down after three days last week when Walsh presented a proposal he acknowledged was less attractive than previous offers, saying it had been modified to take account of expenses during the impending strike. BA is open to a “sensible settlement,” Walsh said in a statement yesterday. Woodley said yesterday he’s open to negotiations with the company “at any time.” An assessment of the cost of future industrial action can only be made after the event and BA’s full-year earnings estimate therefore remains “broadly unchanged,” the carrier said March 22 after markets closed. ‘One-Off Cost’ “BA seems resigned to facing the short-term losses in order to secure changes in working practices and cost savings in the longer term,” said Jonathan Wober , an analyst at Societe Generale SA in London with a “hold” rating on the stock. “Investors seem to be regarding this as a one-off cost, as long as the results that are realized are in management’s favor.” British Airways shares were trading little changed at 245.5 pence as of 1:34 p.m. in London and have gained 31 percent this year for a market value of 2.83 billion pounds. That’s the second-best performance on the eight-member Bloomberg EMEA Airlines Index , which has advanced 3 percent. Air France-KLM Group, Europe’s largest airline, has added 2.9 percent and Deutsche Lufthansa AG, the No. 2, is up 4.2 percent. AMR, Iberia Gains at BA have been spurred by preliminary approval from regulators for a pact with AMR Corp.’s American Airlines and a pension agreement with employees that should ease the way for a merger with Iberia Lineas Aereas de Espana SA of Spain. Iberia’s board is scheduled to meet tomorrow, with a definitive agreement to be signed by the end of this month. “The stock market is all about looking forward,” said Marlborough’s Bennett. “Combine cost cuts from cabin crew with what comes next with Iberia and American and that puts British Airways in a much better position.” BA’s “strong balance sheet” also stands it in good stead to take on Unite, Bennett said. Liquidity at Europe’s third- biggest airline “remains satisfactory,” with a cash balance of 1.6 billion pounds as of December, Moody’s Investors Service said in a note on March 18. The board of British Airways supports the strategy being pursued by Walsh, spokeswoman Dayna Ward said in an interview this week, citing comments from Chairman Martin Broughton . Unite’s Woodley had appealed for directors to step in and help resolve the dispute after talks collapsed on March 19. “I don’t expect them to negotiate between now and Saturday,” Woodley said March 22 after a rally near Heathrow. Lost Custom Still, a prolonged strike could pose a “competitive risk” for BA and hurt the carrier’s market share as customers switch to other airlines, said Yan Derocles , a Paris-based analyst at Oddo Securities with a “reduce” rating on the stock. Virgin Atlantic Airways Ltd. has reported increased bookings while BMI, the second-largest operator at Heathrow, will add 4,500 seats during the second phase of the strike. Justin Urquhart Stewart , who oversees about $3.3 billion at 7 Investment Management in London, said the dispute is still negative for BA and that the two sides should “get rid of the ego in the dispute” and return to talks. “They’ve got to find a face-saving way of getting out of this,” said Urquhart Stewart, who holds BA shares through an Exchange Traded Fund. “The cost structure at BA needs to be changed, but with everybody getting involved — the government and opposition included — the two sides are getting pushed into a position where they’ll find it very difficult to back down.” To contact the reporter on this story: Steven Rothwell in London at srothwell@bloomberg.net

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Aron Cramer: Google and China: When Should Business Leave on Human Rights Grounds?

March 22, 2010

With Google’s decision today to shut down its Chinese-based search engine, google.cn, the company has won considerable praise from organizations concerned about its human rights record. This approval stands in stark contrast to the condemnation the company received when first entering the country in 2006. The Financial Times cartoonist Ingram Pinn captured these contrasting perspectives perfectly, depicting Google as the speech-suppressing “Great Firewall of China” in 2006, then casting the company as the lone protestor stopping the tanks in their tracks in 2010. Google’s decision again raises a question of serious interest to business, the public, and governments: When is it right to cut ties and leave a country on human rights grounds? Leaving often seems like the clear-cut ethical winner in this debate. There often is, however, a case for companies to stay, provided there is a commitment to making a positive impact on human rights. Leaving may look and feel great to those of us in the West, but exiting a market may not always have the desired impact. Consider the case of the consumer electronics companies. They are increasingly under fire about whether the metals they source from the Democratic Republic of Congo (DRC)–tin, tantalum, and tungsten–may be helping fund the purchase of weapons that fuel violence and human rights abuses in one of the world’s toughest conflict zones. There is a consensus that “conflict minerals” should be eliminated from the electronics industry, and the tempting next step is to cut out all minerals sourced from the DRC. But that decision isn’t as simple as it may seem: Because end buyers purchase from refiners that often combine ore from multiple sources, traceability remains a problem, and it might not even be practical to “leave” the country. By contrast, what if companies were to leverage their purchasing power to drive positive change in the DRC? Perhaps there is a role for business to bring “development-oriented metals” to market by identifying specific mines where the benefits of mining are shared locally and production upholds human rights. As an alternative to leaving, companies could also explore diplomatic channels to encourage a sustainable trade in minerals in the DRC and the surrounding region. GE is taking a related approach in China and Vietnam, where the issues are very different than those in the DRC. Among the company’s top corporate responsibility priorities is “rule of law.” GE’s leadership believes that effective government in emerging markets is critical for both business success and human rights, and the company therefore works with government and civil society to establish transparent legal systems, encourage open law-drafting processes, and develop well-trained judges and lawyers. For example, GE attorneys teach classes at law schools in both countries, and the company’s foundation also invests in rule-of-law initiatives by providing grants such as one in China to an organization focused on commercial law, intellectual property rights protection, and citizens’ rights, and another in Vietnam to a program that aims to strengthen courts and enhance legal transparency. One might conclude that the comparisons between countries don’t work, because all situations are different. In fact, that is exactly the point: When it comes to determining whether a company’s decision to enter or exit a market is good or bad for human rights, there’s no one-size-fits-all rule, and the ethics of the decision will vary considerably with the context. As such, “are you in or are you out” may be the wrong question. No company automatically advances human rights by leaving a country, and, likewise, no company automatically improves the situation by staying. In all but the worst cases, it’s how business participates in challenging markets that is the ultimate test. Does the company have a clear understanding of how its products, services, and market presence will impact human rights? Has the company identified its most significant human rights risks, and does it understand how to mitigate them? Is it working with sympathetic government partners to advance human rights? Let’s also remember the opinions of the people these decisions are designed to support: the local population. Many companies left South Africa and Burma because democratically legitimized local movements called for mass divestments, which is not the case in China today. We don’t know yet whether Google’s decision, which essentially takes them out of the search business in China, will increase freedom of expression, privacy, and security. Some argue that the company should distance itself from censorship by leaving; others argue that the company should stay with a search engine that filters less (and more transparently) than the local competition. Whatever one’s opinion, the fact that an increasing number of companies are weighing these decisions demonstrates that human rights considerations are reaching senior leaders in business like never before. The time has come for us to applaud those companies that seek to integrate human rights into their decision-making, to criticize those that don’t — and to be open to the fact that this could mean praising both companies that seek to make an impact by staying in difficult markets as well as those that decide to leave. Aron Cramer is President and CEO of BSR, a global business network and consultancy focused on sustainability, and the coauthor of the forthcoming book Sustainable Excellence (Rodale 2010). Dunstan Allison Hope is BSR’s Managing Director, ICT Practice, and the coauthor of the forthcoming book Big Business, Big Responsibilities (Palgrave Macmillan 2010).

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Jim Luce: C.E.O. Brooke Partridge Helps Lead Technology Thought in Developing World

March 14, 2010

Despite our best efforts to meet in Barcelona, at the GSM World Congress , with 49,000 participants spread between 1,300 vendors, C.E.O. Brooke Partridge and I missed each other. We succeeded in connecting between New York and Palo Alto by phone a week later. It had been my impression that she was someone I had to interview, but I did not realize how integral she was to thought leadership on technology in the developing world until we spoke. Brooke Partridge of Vital Wave Consulting helps steer the direction of technology in emerging markets. She’s been moving in this space for a long time. Brooke started Vital Wave Consulting nearly five years ago after a decade at HP as a leader in emerging technologies and emerging markets. She was key in dragging the emerging-market focus from the realm of corporate social responsibility (CSR) into the business units. During that period, HP had a head start on emerging markets, and Brooke saw that other companies getting into the space were looking for strategic support and guidance. She started Vital Wave Consulting to serve a wider base of companies, and Brooke and the rest of her firm became advisors for some of the biggest tech companies in the world. This “wag the dog” approach had a strong impact on several multinational organizations that were able to maximize their impact on global business and the developing world with her firm’s advice. Brooke has been quietly moving behind the scenes for many years now helping technology companies strategize and tool up for successful revenue growth in emerging markets. Indeed, she counts Intel, Microsoft, and other Fortune 500 firms among Vital Wave’s customers. “One of the reasons our company has survived in this economy is because of this role. We go beyond talking about the size and importance of these markets. We really quantify and characterize the opportunity, creating specific plans to help companies capture it.” Initially, Brooke saw the need for a firm that would specialize in helping companies grow profitably in these countries. Up until then, technology corporations either ignored emerging markets or dealt with them in their philanthropic or CSR areas. Not always, anymore. Brooke Partridge and David Lehr with the Xian Province Ministry of Commerce in China. “But if you want financially sustainable investments in poor countries,” she says, “you have to talk about the P word.” Profitability, that is. Among many who work in the NGO and development communities, the idea of making money from people in poor countries remains taboo, but Brooke sees it as vital. “If you want companies to invest in these markets for the long term, you have to demonstrate that they can make money in them. And that’s what we help to do,” she says. Yet a funny thing happened along the way. “A few years ago, the development community came to us,” says Brooke. Leading foundations such as the Gates Foundation , the U.N. Foundation , the GSMA Development Fund , and the Cherie Blair Foundation for Women liked Vital Wave’s approach to the challenge of financially sustainable development – and began working with the company. It was organic growth. What Vital Wave Consulting does for the private sector has proved valuable for NGOs, and they reached out to Vital Wave Consulting themselves. The company has since authored several reports in collaboration with these foundations, on topics such as Mobile Healthcare , Health Information Systems , and Mobiles and Women in the Developing World. The reports stress multi-sector collaboration and highlight the need for the private sector to be involved in these solutions. A seasoned globe-trotter, Brooke enjoys a moment to relax with kids in Egypt. Brooke’s personal background, how she got here, is an integral piece of the picture. Brooke grew up in Silicon Valley as it grew up – when San Jose and Santa Clara were known for agriculture not computer chips. She was in one of the first middle schools to have an Apple Macintosh and a computer programming class (two computers shared among 30 programming students!). She grew up a few miles from Apple and HP offices in Cupertino. There were entrepreneurs all around. What Brooke calls “A heritage of entrepreneurship.” Then, when she was 15, she went to Peru for a summer – her first exposure to both poverty in the developing world and the innovative ways that poor people earn money. She watched what people do every day in low-income areas to creatively increase their income, utilize what assets they have to make extra revenue. People maximize and monetize whatever assets they have available. Own a wheelbarrow? Use it! Move things for people and charge money for it. Eventually, one has to ask, “How could someone make more money with a computer, a cell phone, a server?” Not long after, she found herself living in Mexico, and Chile, plus a year living in Madrid. Eventually, she was focused heavily on markets like South Africa, China, and India. With her unusual background, no wonder Brooke landed at the intersection of technology, entrepreneurship, business growth, and emerging markets. Brooke Partridge and China Specialist, David Lehr, visit the Rural China Rain Gold Junior Middle School. When Brooke Partridge was in high school, her guidance counselor asked her what she wanted to do as a career. When Partridge replied that she wanted to work internationally, the guidance counselor said “Oh, that just means you want to travel. But what do you want to do for work?” Little did he know just how serious Brooke was. Partridge’s early experiences led her to study international affairs and economics in her undergraduate and graduate studies, but her early corporate experiences left her wanting more. Brooke was nearly always working on new, “disruptive” technology solutions – for both developed and developing-country markets. Disruptive means that the new technological solution would disrupt existing but weaker solutions. Ultimately, she became the business director of HP’s Emerging Market Solutions organization where her passion for and experience in disruptive technology, international business and development came together. Brooke presents “Best Practices” at HOIT 2007, IIT in Madras, India. From her early days in developing countries, she had always been convinced of the connection between profitable business and economic development. This was her first opportunity to demonstrate it. And through Vital Wave Consulting, those opportunities keep coming. “That is really my guiding philosophy, and that of Vital Wave Consulting. I don’t apologize appealing to corporations’ profit motive. I think that even the development community is seeing that profit – i.e., sustainable business models – is essential for scaling their programs. “There is big money in making products for emerging markets, and it results in good development. People in emerging markets want choices, they spend their money wisely, and the market economy can work for them.” Paul Stevers, founder of CharityHelp International ( CHI ), agrees with the view that profitability is good for development. Paul told me, “Thought leaders like Brook Partridge and Muhammad Yunus ( Grameen Bank ) are leading the way on how to develop sustainable business models that can be scaled up significantly and benefit millions of people in developing countries.” Brooke’s vision stems from her total emersion in local cultures – here, in China. C.E.O. Brooke Partridge of Vital Wave Consulting does not believe in hand-outs. She is involved in developing the world hands-on. Through her global vision, multi-national corporations and international philanthropic organizations will be able to assist the developing world develop itself. That, my friends, is true leadership. Other Stories by Jim Luce : Peter Buffett and Angelique Kidjo Release Single to Support Girls in Africa (HuffPo) From Kansas to Cairo: Introducing Soliya’s World-Changing “Terana” (HuffPo) U.S. Congresmember Carolyn Maloney on Abhorrent Anti-Gay Legislation in Uganda (HuffPo) Goldman Sachs Helps 10,000 Women, Including Andeisha Farid (HuffPo) Chatting with UNICEF’s Director Ann Veneman (HuffPo) NBC’s Brian Williams: Changing the World for the Better (HuffPo) Sweden’s Queen on “Fire Souls” – Leaders in Child Protection (HuffPo) Asia Society’s Prez on Global Citizens Like Obama (HuffPo ) Interview with the Red Cross Secretary General in Geneva (HuffPo) Pending: Earth Institute at Columbia Takes Leading Role on Cell Phones for Social Change Pending: Gates Foundation’s Ignacio Mas on eFinance in the Developing World Pending:GSMA and the Cherie Blair Foundation for Women Publish Women & Mobile: A Global Opportunity Report Pending:mHealth: Alliance: Partnership Between the U.N. and Vodafone Pending:Queen Rania on the Role of Cell Communications in Advancing Education Around the World Pending:Rockefeller Foundation Leads Panel on Mobile Transformation of Developing World

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South Africa’s 2009 gold output falls 5.8%

March 14, 2010

South Africa’s 2009 gold output falls 5.8%

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Stocks Rise, Led by Emerging Market Banks, Miners; Gold Gains, Yen Weakens

March 12, 2010

By Daniel Tilles and Mark Gilbert March 12 (Bloomberg) — Stocks rose as commodity companies and banks drove the MSCI Emerging Markets Index to its fifth week of gains. Gold led commodities higher, while the yen weakened. The emerging-markets gauge rose 0.4 percent at 10:50 a.m. in London, heading for its longest winning streak since May. Futures on the S&P 500 added 0.2 percent, after the benchmark index for U.S. equities yesterday hit a 17-month high, while the MSCI World Index climbed 0.6 percent. The yen fell against 11 of its 16 most-traded counterparts. Gold rose for a second day and nickel climbed for the first time in five days. Emerging-market and high-yield bond funds each took in more than $1 billion in the week to March 10, according to EPFR Global, a Cambridge, Massachusetts-based research company. European industrial output rose the most in more than two decades in January, signaling the recovery may be strengthening. Japanese Finance Minister Naoto Kan said intervention is an “option” when “markets move too abruptly.” “This is a continuation of the improvement in risk appetite,” said Henrik Degrer , a fund manager at Svenska Handelsbanken in Stockholm, which oversees $36 billion. “The Greek issue seems to be contained, so now we can shift again to the macro-economic data, which is looking fairly good.” Sasol, Cnooc South Africa’s Sasol Ltd. and Cnooc Ltd. of China climbed, driving the MSCI emerging index higher. The Micex index in Russia, the world’s largest energy supplier, advanced 0.9 percent for the first gain in four days. The ruble strengthened 0.6 percent against the dollar, heading for its biggest weekly rise this year. The MSCI World Index of 23 developed nations’ stocks rose 0.3 percent, while the Stoxx Europe 600 Index advanced 0.3 percent. Volkswagen AG, Europe’s biggest carmaker, climbed 2.7 percent in Frankfurt on speculation yesterday’s announcement of a convertible-bond sale reduces the likelihood of a rights offer. The MSCI Asia Pacific Index advanced 0.4 percent as Japan’s Nikkei 225 climbed 0.8 percent. Nissan Motor Co. , which gets about 77 percent of its revenue outside Japan, increased 2.4 percent. U.S. futures gained before a Commerce Department report at 8:30 a.m. in Washington that may show retail sales fell in February as blizzards kept Americans away from auto dealers and limited shopping at malls. Purchases dropped 0.2 percent after rising 0.5 percent in January, according to the median estimate of 77 economists surveyed by Bloomberg News. Confidence, Inventories A report from Reuters/University of Michigan, due at 9:55 a.m., may show the group’s preliminary consumer sentiment index for March rose to 74 from 73.6 last month. A Commerce Department report at 10 a.m. may show business inventories increased 0.1 percent in January. The yen weakened to 124.18 per euro, from 123.82. The pound strengthened 0.5 percent to $1.5139 after U.K. house prices increased in February at the fastest pace in more than seven years. The Swiss franc strengthened to 1.4589 per euro, from 1.4617 yesterday, even after the central bank said yesterday it would act to stem “an excessive appreciation” against the euro. The Dollar Index declined 0.5 percent to 79.922, paring its gain for the year to 2.7 percent. “The Bank of Japan is sensitive to the dangers of deflation, after the yen appreciated in the current cycle, and is looking at intervention, along with the Swiss National Bank,” said Henrik Gullberg , a currency strategist at Deutsche Bank AG in London. Gold, Oil Gold for immediate delivery gained 0.7 percent to $1,116.90 an ounce in London and silver added 0.7 percent to $17.295 an ounce. Nickel for delivery in three months advanced 1.6 percent to $21,625 a metric ton, taking its gain this year to 17 percent, the most of any of the main metals traded on the London Metal Exchange. Crude oil rose 0.3 percent to $82.35 a barrel in New York, before a meeting of the Organization of Petroleum Exporting Countries next week. The yield on the 10-year Greek bond, the country’s new benchmark, fell 1 basis point to 6.34 percent, while the two- year note yield advanced 10 basis points to 5.12 percent. The yield premium investors demand to hold the 10-year security over German bunds declined 4 basis points to 311 basis points. The cost of protecting against a default on Greek government bonds rose, with credit-default swaps climbing 5 basis points to 307, according to CMA DataVision prices. To contact the reporter for this story: Daniel Tilles in London at dtilles@bloomberg.net

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India’s Stalled Arms-Buying System Leaves Its Military Outgunned by China

March 11, 2010

By James Rupert March 12 (Bloomberg) — India, which has tripled its defense spending in a race against China’s military buildup, is having trouble converting the funding into weapons and equipment its military says are urgently needed. The government in five years has canceled two tenders for artillery guns, a contract for ammunition propellant and two helicopter tenders, together worth at least $4 billion. No contract exceeding $100 million has been awarded through competitive bidding in at least 23 years, said military analyst V.K. Kapoor . Defense Ministry spokesman Sitanshu Kar said he couldn’t immediately identify the last such deal. India’s “military capacity and preparedness are being reduced because of the inadequacy of the procurement process,” said Uday Bhaskar , director of the National Maritime Foundation , a New Delhi research institute on strategic issues. The military’s upgrading is “on hold and its obsolescence is increasing.” The cancellations have disrupted attempted weapons sales by Textron Inc.’s Bell Helicopter unit in Fort Worth, BAE Systems Plc and South Africa’s Denel Ltd. Bhaskar said they have hurt troop readiness along more than 4,200 kilometers (2,600 miles) of Himalayan frontiers , where India has fought three full-blown wars with Pakistan and one with China. India took 20 years to negotiate a 2004 contract for jet trainers, even as 157 pilots died in three decades of jet fighter crashes blamed partly on inadequate training craft. Obsolete Weapons The Defense Ministry, which wields the world’s 10th-largest military budget, has surrendered 3 percent to 9 percent of its announced budget in each of the past seven years because it couldn’t spend all the money allocated for arms, according to a January report by the New Delhi office of accounting firm KPMG and the Confederation of Indian Industry . Half of India’s weapons are obsolete, the report said. China has almost quadrupled its official defense spending since 2000 to $78 billion for fiscal 2011, 7.5 percent more than in the previous year. India will spend $32 billion on defense this year, triple its 2000 outlay and 4 percent more than in fiscal 2010. India has bought no artillery for more than 23 years, a period during which the government has sought to buy more than 1,500 155 mm guns for use mainly along the Pakistani and Chinese borders. Such guns were used to defeat Pakistan in a 1999 conflict at Kargil in Kashmir; India would have had too few had that fight grown into a full-scale war, said Kapoor, who is also a retired army lieutenant general. Howitzer Delays India’s military is adequately prepared on its borders and will benefit from an accelerating modernization program, Minister of State for Defense M.M. Pallam Raju said at a conference with defense companies in New Delhi on Feb. 16. “In the past five years we have created a faster, more transparent procurement process,” he said. That process is being tested as India’s air force conducts flight trials in the world’s biggest fighter-jet purchase in 15 years. Chicago-based Boeing Co. , Lockheed Martin Corp. and four European builders are vying under a 2007 tender to sell India 126 warplanes worth $11 billion. India is expected to sign a separate deal for 29 naval MiG- 29 fighters during this week’s visit by Russian Prime Minister Vladimir Putin . John Giese , a spokesman for Bethesda, Maryland-based Lockheed, called the fighter tender “one of the most challenging competitions in the history of fighter aviation.” Given the complexity, “the competition has been very efficient, transparent and professionally managed,” Boeing spokeswoman Mary Ann Brett said in an e-mail. European Competitors Lockheed and Boeing are competing with Paris-based Dassault Aviation SA , Stockholm-based Saab AB , European Aeronautic, Defense & Space Co. , which has headquarters in Paris and Munich, and Moscow-based OAO United Aircraft Corp . While the military says rules last amended in November let it sign a contract within 20 to 34 months, it is too early to judge their effectiveness, said Gurpal Singh, a deputy director general for the industry federation in New Delhi. The air force asked the government in 1983 to order advanced jet trainers because pilots taught mainly in subsonic jets were losing control of supersonic MiG-21 fighters that were more than three times faster. Political and bureaucratic battles under 11 prime ministers added to the delays before BAE Hawk jets were purchased. India’s main political blocs — led by the Congress Party and the Bharatiya Janata Party (BJP) — have fought over arms buying since 1987. Indian newspapers reported then that Swedish artillery builder Bofors, now a unit of London-based BAE, bribed officials to buy its guns. The scandal scuttled most of the deal and helped drive the Congress government of Prime Minister Rajiv Gandhi to defeat in 1989 elections. Reviewing Deals India was still seeking artillery in 2004 when Congress was elected, and halted bidding as it reviewed defense deals under the previous BJP administration. When police investigated Pretoria-based Denel for paying illegal commissions in winning a 2002 army order for rifles, the government blacklisted the state-owned company. Four more foreign companies were barred from defense contracts last year, after the Central Bureau of Investigation said they were being investigated on suspicion of bribery. That forced Singapore Technologies Engineering Ltd. out of the race, leaving London-based BAE as a single vendor and prompting officials to halt the tender. To contact the reporter on this story: James Rupert in New Delhi at jrupert3@bloomberg.net .

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D-Pharm Chief Says Experimental Stroke Drug May Reach Market by Late 2013

March 9, 2010

By Gwen Ackerman March 9 (Bloomberg) — D-Pharm Ltd .’s most advanced experimental medicine, the DP-b99 stroke treatment, may reach the market as early as the end of 2013 if results from a late- stage study match those of an earlier trial, Chief Executive Officer Alex Kozak said. In a mid-stage trial, DP-b99 doubled the number of patients who completely recovered from strokes caused by blood clots. In a best-case scenario, a final-stage trial will produce similar results, and the U.S. Food and Drug Administration may waive requirements for a second trial, Kozak said in an interview March 7 at the company’s Rehovot, Israel headquarters. “The FDA told us that because this is a desperately needed drug for a life-threatening disease, that allows it to skip a second Phase III trial if results for the first are more than the minimal required for approval,” he said. In December, D-Pharm said it began treating its first Phase III patient with the stroke drug, which protects brain cells against damage during periods of insufficient blood circulation. While Kozak would not say how many of the 770 participants have been recruited, centers are already operating in Israel and South Africa, and complete enrollment is expected by 2012, he said. The need for a second Phase III trial would delay introduction by as much as three years, Kozak said. About 795,000 people in the U.S. experience a new or recurrent stroke each year, according to the American Stroke Association . Worldwide, stroke accounts for 5.7 million deaths annually, according to the World Stroke Organization . Multibillion-Dollar Market Kozak says the drug may compete in a multibillion-dollar market, citing market research by AstraZeneca Plc. The U.K.’s second-largest drugmaker had estimated a $10 billion market for a stroke medicine that failed a late-stage test in 2006. “Companies that have tried to develop these kinds of drugs before have been largely unsuccessful,” said Nick Turner , an analyst at Mirabaud Securities in London. “Clearly, there would be a large commercial opportunity of they are successful. But it is a question of ‘if’ rather than anything else.” Natan Bornstein, vice president of the World Stroke Organization , also said many attempts to develop neuroprotective drugs have failed. D-Pharm’s compound is different because it targets several modes of cellular action, and trials have shown that it works and has a beneficial effect, he said in a telephone interview. ‘Huge’ Impact The impact of a successful development of a neuroprotective drug will be “huge,” as it will allow patients to be treated in the ambulance, before they arrive at hospital, and may be administered and still effective within a longer period of time after a stroke has occurred than existing treatments. Drugs now used to break up the clots don’t protect brain cells, and could be used alongside D-Pharm’s treatment, Bornstein said. “Combining this type of neuroprotective treatment with existing therapies will save a lot of stroke victims from disabling neurological deficits,” said Bornstein, who is also the chairman of the Israeli Neurological Association and on the steering committee for the clinical trial on DP-b99. D-Pharm, which raised 85 million shekels ($22.6 million) in an initial public offering in Tel Aviv in August 2009, has enough cash for funding through its interim report on the stroke drug in 2011, Kozak said. The company will then consider different funding opportunities, he said. The company will look for a partner to sell DP-b99, Kozak said. It has partnerships with China’s Wanbang Biopharmaceuticals Co. and South Korea’s Yungjin Pharmaceutical Co. A separate Phase III trial of 450 patients is planned in China next year, Kozak said. D-Pharm , whose shares rose 74 percent in the past 12 months compared with a 31 percent gain of the TA-100 index in Tel Aviv, also has plans to start looking for financing for a Phase II trial of its epilepsy drug, as well as for further development of an Alzheimer’s treatment now being tested in animals, Kozak said. For Related News and Information: Health stories from Israel: TNI ISRAEL HEA BN Top Mideast stories: TOP MIDEAST Top Health stories: TOP HEA For more on Drug pipelines: {NI DRGPIP }

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