... InvestSource Inc.: China Health Management Hospital Appointed Medical Provider by ... more pessimism about the economy into the stock market. The Dow Jones industrial average fell nearly ...
Thursday, March 27, 2008
InvestSource Inc.: China Health Management Hospital Appointed Medical Provider by Australian Consulate General of Guangzhou for National Soccer Teams
Dollar slips on rebound in gold, commodities
... TOKYO (Reuters) - The dollar slipped on Wednesday ... is tapering off," said Hiroshi Yoshida, a forex trader at Shinkin Central Bank. The euro ...
Forex - Dollar recovers some ground, remains vulnerable
... Forex - Dollar recovers some ground, remains vulnerable ... has weakened slightly against the dollar after Japanese officials aired some concerns about the outlook ... for the worlds second-largest economy. Bank of Japan (BoJ) policy board member Miyako Suda warned ...
Wednesday, March 26, 2008
Iraqi Minister of Trade: Damascus Summit Bolsters Arab Relations
... Damascus, 26 March 2008 (SANA) -- Iraqi Minister of Trade Abdul Falah al-Sudani said ... March 2008 (Voices of Iraq) -- Iraqs Stock Exchange (ISX) index decreased by 0.661 % to ...
Dollar snaps winning streak as credit jitters linger
... markets," said Haruhisa Takagi, head of the forex trading group at Sumitomo Mitsui Bank. Many ... could be casualties in the crisis. The Australian dollar climbed about 0.6 percent against the ...
ABCs General Assembly ratifies 2007 consolidated accounts
... Authority. ABC is listed on the Bahrain Stock Exchange. The ABC Group is a leading bank ... Frankfurt, New York, Singapore, Tripoli, Tunis, Algiers, Egypt, Bahrain, Beirut, Abu Dhabi, Tehran, Amman and ...
European shares led lower by miner Xstrata, banks
... impact of a global credit crisis hit stock markets worldwide. Xstrata was Europes biggest laggard on ... iron ore miner, said talks to buy Swiss rival Xstrata had failed and that Vale ...
Serial EEPROMs come in 2 x 3 x 0.6 mm MLP8 package.
... shares are traded on the New York Stock Exchange, on Euronext Paris and on the Milan ... P. 21 City : GENEVA Country : Switzerland Phone : +41 22 929 29 29 ...
Stock Market Alerts LLC.: Investment Tips for Aggressive Traders
... Stock Market Alerts LLC.: Investment Tips for Aggressive Traders ... fourth cobalt off-take agreement with a large Chinese refiner. This now brings the contractual commitments ...
Red tape targets are not what they seem
... well before either Germany invaded Russia, the Japanese brought in the Americans by attacking Pearl ... victory. The point Biggs makes is that equity markets steady not when the flow of bad ...
LSE index loses 41.80 points
... Equities moved both ways on the Lahore Stock Exchange and finally settled in red zone amid ... the absence of the top leadership of Pakistan Peoples Party (PPP) and the Pakistan Muslim ...
Tuesday, March 25, 2008
NBAD investors okay $378m bond plan
... in the fourth-quarter, beating analysts forecasts, on stock market-related income and said it planned to expand ... plans to open eight new branches in Egypt to take the total to 30 by ...
Egypt Kuwait Hldg buys 5 pct of Sudans Petrodar
... March 25 (Reuters) - An affiliate of Egypt Kuwait Holding EKHO.CA(EKHK.KW: ) signed an agreement ... A company statement sent to the Egyptian stock exchange said its subsidiary Tri Ocean signed the ...
Whats Up With Asian Currencies?
... in North America, Latin America, Africa and Australia, in short everywhere have soared ... in and out of the region. Local stock markets make international headlines as thinly traded markets ...
Company Upgrade: Introduces Medistem Laboratories to our Small Cap Portfolio
... world renowned independent research firm, based in Johannesburg, South Africa. Along with walking investors through ... of 1933 and Sections 21E of the Securities Exchange Act of 1934, and are subject to ...
Monday, March 24, 2008
South Africa: Stock Trade Case to Set Precedent
... be notified within two days of the trades taking place. Doel said yesterday the JSE was still following the process with Blue Label. It had not been decided whether ...
BP plans refinery project with Cals Ltd
Commodity Online NEW DELHI: Energy giant BP Plc is likely to set a co operation with Cals Ltd, a Spice Energy holding company for its proposed five million tonns oil refinery at Haldia near Kolkata.
Petrol in India is cheaper than Coca Cola
By Yogesh BirlaIn fact, petrol is cheaper than the Coca Cola you drink. It is not just petrol most liquids that you daily use are more expensive than vehicle fuels.
Algeria Jan-Feb trade surplus jumps vs yr ago
ALGIERS (Reuters) - OPEC-member Algeria posted a $7.53 billion trade surplus for the first two months of 2008, up from $4.16 billion in the same period last year, thanks to soaring oil prices, official figures showed on Sunday.
Saturday, March 22, 2008
Japans Nikkei up 1.8 pct as banks, brokers gain
TOKYO (Reuters) - Japans Nikkei average jumped 1.8 percent on Friday, closing higher for a third straight session as investors snapped up financial shares such as Mitsubishi UFJ Financial Group amid hopes that U.S. measures to cope with the credit crunch will stabilise markets and support the economy.
At-home moms taking a bite out of Bennigans?
Restaurant visits have flattened out as the percentage of women in the work force has slipped. So as families switch to eating in, eateries are increasing their takeout and delivery options.
6 stocks immune to the credit crunch
The Bear Stearns meltdown shows how quickly a company with debt woes can unwind. Heres how to spot companies that are sitting safely on piles of cash.
Wednesday, March 12, 2008
New arrest in SocGen trading scandal
(Reuters) - Police arrested another employee of Societe Generale on Wednesday as they probe the world's biggest rogue trading scandal, Paris prosecutors said.
In January, France's second-biggest listed bank SocGen unveiled 4.9 billion euros ($7.53 billion) of losses which it blamed on rogue deals carried out by Jerome Kerviel, a 31-year old junior trader at the bank.
The losses have made SocGen a possible bid target.
The Paris prosecutor's office identified the latest person being held as a trader from a subsidiary of SocGen.
A source close to the matter said the person being held works for SG Securities, the bank's share brokerage arm.
SocGen declined to identify the person or the division.
GO Capital Halts Redemptions From Global Hedge Fund
(Bloomberg) -- GO Capital Asset Management BV blocked clients from withdrawing cash from its Global Opportunities Fund, at least the seventh hedge fund in the past month forced to take steps to protect itself from falling markets.
Frans van Schaik, the former head of equity research at ABN Amro Holding NV who founded the Amsterdam-based fund in 2000, wrote to investors that the fund is not leveraged and not facing margin calls. The fund, which bets both on rising and falling prices, has assets of about 570 million euros ($881 million).
``A temporary suspension of redemptions is the best defensive measure to protect the interests of the participants,'' van Schaik and other members of GO Capital's management said in a letter posted on their Web site and dated March 11. ``Current market circumstances do not allow the fund to sell investments at a reasonable price.''
At least six hedge funds totaling more than $5.4 billion have been forced to liquidate or sell holdings since Feb. 15 as contagion from the U.S. subprime slump spreads for a seventh month. Others include Peloton Partners LLP's $1.8 billion ABS Fund, Tequesta Capital Advisor's mortgage fund and Focus Capital Investors LLC, which invested in midsize Swiss companies.
GO focused mostly on listed European equities, although it was not restricted in investments it could make, the Web site says. The fund planned to make bets on between 10 and 30 stocks and looked for ``situations of overreaction or stress,'' according to the Web site.
Dollar Falls to Record Low on Concern Fed Package Won't Succeed
(Bloomberg) -- The dollar fell to a record below $1.55 per euro on concern that the Federal Reserve's plan to provide funds to banks won't be enough to break the gridlock in money-market lending and stem credit losses.
The U.S. currency erased more than half of yesterday's 1.6 percent rally versus the yen, the biggest in six months, which came after the Fed said it would extend $200 billion of credit to financial institutions to spur lending. Traders bet the Fed will cut rates by as much as three quarters of a percentage point next week to avert a recession, while the European Central Bank keeps borrowing costs unchanged.
``It's difficult for the dollar to gain traction,'' said Paresh Upadhyaya, who helps manage $50 billion in currency assets at Putnam Investments in Boston. ``The Fed is probably running out of options; the market is fixated on interest-rate differentials, which are clearly negative for the dollar.''
The dollar fell to $1.5504 per euro, the weakest since the euro's 1999 debut, and traded at $1.5492 at 10:12 a.m. in New York, from $1.5338 yesterday. The previous historic low was set yesterday. It dropped to 102.32 yen from 103.42, within one yen of an eight-year low. The euro traded at 158.59 yen from 158.61.
Euro gains were limited after Luxembourg Finance Minister Jean-Claude Juncker said he is ``very vigilant'' on the euro in current circumstances and that exchange rates should reflect fundamentals. He spoke to reporters in Brussels.
Gulf Pegs
The yen climbed against major currencies, including a 1.3 percent rally versus South Africa's rand, as a government report showed Japan's economy grew an annualized 3.5 percent last quarter, faster than the 2.3 percent median forecast of economists surveyed by Bloomberg News.
Forward contracts to buy United Arab Emirates dirhams rose the most in two weeks after Economy Minister Sultan Bin Saeed Al Mansouri said the dirham's dollar peg is ``contributing'' to record inflation.
A Qatari official denied in a telephone interview that Gulf central bankers will consider dropping the dollar peg when they meet next week. Gulf countries are under pressure to revalue their currencies or drop dollar pegs after the U.S. currency fell 10 percent against the euro last year and the Fed cut rates. The weaker dollar boosts the cost of imports from Europe, while Gulf states have to follow rate cuts, stoking inflation.
The euro extended its gains against the dollar earlier after a European Union report showed industrial production in the region increased for the first time in three months in January. It rose 0.9 percent from the prior month, more than twice the rate forecast by economists surveyed by Bloomberg.
`Stay Short Dollars'
The euro also rose on speculation ECB President Jean-Claude Trichet will highlight inflation risks today at a press conference. ECB council member Axel Weber yesterday said that he sees ``no room'' to lower rates.
The ECB's main rate is 1 percentage point above the Fed's 3 percent target rate for overnight loans between banks.
Policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed yesterday on a second round of emergency- loans to curb rising money-market rates. The Fed said it will lend Treasuries through a new lending tool and widen the collateral it accepts to include mortgage-backed securities.
``Read the need for such new measures as being a symptom of what ails the world and not a panacea for its problems,'' said David Simmonds, the London-based global head of currency research at Royal Bank of Scotland Plc, the world's fourth- biggest foreign-exchange trader. ``Stay short dollars.''
Monday, March 10, 2008
Goldman says can't rule out Fed emergency rate cut
(Reuters) - An emergency interest rate cut from the Federal Reserve is possible ahead of its March 18th policy meeting, according to a Goldman Sachs research note on Monday.
Goldman said its view on Fed policy changed on Friday.
The government reported on Friday that a second straight month of job losses and the Fed announced new steps to inject liquidity into the financial system as credit availability remains tight.
McDonald's February Sales Increase 12%, Led by Europe
(Bloomberg) -- McDonald's Corp.'s February sales rose more than analysts estimated as the world's biggest restaurant company lured customers with burgers and chicken sandwiches in Europe and breakfast in China.
The stock rose the most in more than a month in New York trading.
Sales at U.S. outlets open more than 13 months rose 8.3 percent, the Oak Brook, Illinois-based company said today in a statement. Comparable-store sales in Europe advanced 15 percent while gaining 11 percent in the region encompassing Asia, the Middle East and Africa. Last month's extra day for the leap year added 4 percentage points to worldwide same-store sales.
Specialty burger and chicken sandwiches spurred sales in Europe, McDonald's largest region by revenue, while breakfast boosted sales in China and longer hours helped out in Australia. In the U.S., a McSkillet breakfast burrito promotion and dollar- menu advertising lured consumers pinched by declining home values and higher fuel prices.
``McDonald's put up another remarkably strong result in Europe,'' Jason West, an analyst at Deutsche Bank Securities, wrote in a note today. The U.S. results suggest ``McDonald's is not losing share to U.S. competitors as some may have feared.''
McDonald's climbed $1.79, or 3.4 percent, to $54.06 at 10:14 a.m. in New York Stock Exchange composite trading, the biggest increase since Jan. 31. The stock dropped 11 percent this year through last week after rising in each of the past five years.
The median estimate of four analysts in a Bloomberg survey was for an increase of 7.3 percent in same-store U.S. sales.
ECB's Trichet `Concerned' About Euro's Appreciation
(Bloomberg) -- European Central Bank President Jean- Claude Trichet said he's ``concerned'' about the euro's appreciation, intensifying his rhetoric after the currency climbed to a record against the dollar.
``We're concerned about excessive exchange-rate moves in the present circumstances,'' Trichet told reporters in Basel, Switzerland today. It's the first time Trichet has specifically expressed worry about the currency since November, when he opposed ``brutal'' moves.
The euro fell as much as 0.3 percent after the comments before rebounding, as investors decided Trichet's ability to weaken the currency is limited. The strongest European inflation in 14 years is preventing the ECB from cutting interest rates while the Federal Reserve is slashing borrowing costs to stave off recession in the world's largest economy.
``Trichet is making a distinct change in emphasis,'' said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. Still, ``while the ECB is on hold and the Fed is cutting rates, rate differentials will continue to move in support for the euro.''
The euro rose to a record $1.5459 on March 7, a day after Trichet declined to sound a warning following the ECB's decision to leave its key rate unchanged at 4 percent.
`Strong Dollar'
On that occasion Trichet noted only that U.S. authorities support a ``strong dollar,'' an observation he repeated today with ``extreme attention.'' U.S. Treasury Secretary Henry Paulson said March 7 that a strong dollar is ``in our nation's interest.''
Unlike the Fed, which has cut its benchmark interest rate 2.25 percentage points since September, Trichet's ECB has refused to reduce rates with inflation in breach of its 2 percent goal.
By signaling an unwillingness to take action, the ECB is indicating ``tacit support for its record-high euro as it uses currency policy to contain inflationary pressures rather than monetary policy,'' said Ashraf Laidi, a currency analyst at CMC Markets in New York.
ECB Executive Board member Juergen Stark told a conference in Paris on March 7 that the ECB does not target a euro-dollar exchange rate. Currency developments ``should be taken into account by monetary policy only to the extent that they have a medium-term influence'' on inflation, he said.
Thursday, March 6, 2008
Billionaire dreamlist: helipad and private beach
(Reuters Life!) - Credit crunch? What credit crunch?
More billionaire house hunters than ever are scouring the globe in search of the perfect hideaway.
So how about a Parisian mansion with its own ballroom, a forest-fringed estate in Andalusia complete with helipad or maybe a villa in Anguilla with a "feather-topped beach lapped by deep turquoise waters."
Reveling in the purple prose so beloved by estate agents, the glossy magazine Country Life has picked five of the top properties on the market that even the super-rich dream about.
For $95 million, why not snap up Hillandale, an English country-style estate just 50 miles from Manhattan.
Just four minute's drive from the billionaire's playground of Monaco you could put in a bid for the Domain, a Cote d'Azur mansion with its own stud farm, paddocks and dressage arena.
The credit crunch may have hit big spenders in London's City financial district who once happily invested their huge bonuses in property. But the billionaires are not feeling the chill.
Gold's glitter lures buyers
(Reuters) - Gold's near vertical climb to historic highs approaching the key $1,000 mark shows no sign of abating as bullish forces such as a sinking dollar and record high oil are not seen fading anytime soon.
Fears that expensive oil will stoke inflation combined with worries over potential stock market losses and the U.S. on the brink of possible economic recession will propel gold higher still, analysts say.
"Don't be surprised to see gold trade up to $1,100 (an ounce) or even $1,200 before year-end 2008," said Jeffrey Nichols, managing director of American Precious Metals Advisors.
"And, with the right confluence of economic and geopolitical developments, we could see gold spike to $1,500 or even $2,000 in the next few years," he said.
Gold hit a record high of $991.90 an ounce on Thursday and was at $986.90/987.40 at 1144 GMT. It has jumped 20 percent this year, 56 percent in the past 12 months, doubled in about 2 years and surged from a low of around $250 in August 1999.
It was previously fixed at a record high of $850 in January 1980 as high inflation linked to strong oil, Soviet intervention in Afghanistan and the impact of the Iranian revolution prompted investors to heavily buy gold. After adjusting for inflation, the 1980 high was $2,119.30 at 2007 prices.
The market has ridden waves of investor buying, which lifted prices nearly 50 percent in the past six months, ignoring a handful of negative factors, with most players betting on even higher prices this year and next.
Credit Swaps Thwart Fed's Ease as Debt Costs Surge
(Bloomberg) -- Credit trading models used by Wall Street have gone haywire, raising company borrowing costs even as Federal Reserve Chairman Ben S. Bernanke cuts interest rates.
General Electric Co. is one of five U.S. companies rated AAA by both Standard & Poor's and Moody's Investors Service, making its ability to repay debt unquestioned. Yet when the Fairfield, Connecticut-based company sold 2.25 billion euros ($3.35 billion) of five-year bonds last week, its annual interest payment was $17 million higher than on a sale nine months ago.
Borrowers from investor Warren Buffett's Berkshire Hathaway Inc. to Germany's HeidelbergCement AG face the same predicament. Yields on $5.12 trillion of corporate bonds tracked by Merrill Lynch & Co. average 2.05 percentage points more than U.S. Treasuries, the most since at least 1997.
The higher costs are an unintended consequence of securities that allow investors to speculate on corporate creditworthiness. So-called correlation models used to value them have become unreliable in the fallout from the U.S. subprime mortgage crisis. Last month some showed the odds of a default by an investment-grade company spreading to others exceeded 100 percent -- a mathematical impossibility, according to UBS AG.
``The credit-default swap market is completely distorting reality,'' said Henner Boettcher, treasurer of HeidelbergCement in Heidelberg, Germany, the country's biggest cement maker. ``Given what these spreads imply about defaults, we should be in a deep depression, and we are not.''
Hedging Losses
The problem started in the second half of last year when subprime mortgage delinquencies started to rise, causing investors to retreat from complex instruments such as synthetic collateralized debt obligations, or packages of credit-default swaps that became hard to value. The swaps are contracts based on bonds and used to speculate on a company's ability to repay debt.
As values of CDOs began to fall, banks that had sold swaps underlying the securities started to buy indexes based on them instead, a method of hedging their losses on portions of the CDOs they owned. The purchases are driving the cost of the contracts higher, raising the perception that company bonds tied to the swaps are suddenly riskier and leading investors to demand higher yields throughout the corporate debt market.
The Markit CDX North America Investment-Grade Index, a gauge of credit-default swaps on 125 companies from Wal-Mart Stores Inc. to Walt Disney Co., more than doubled since the start of the year to a record 171 basis points on March 4. The index, which dropped to a low of 29 in February last year, was at 170.5 basis points at 7:10 a.m. in New York, according to Deutsche Bank AG.
Carlyle Fund Gets Default Notice After Margin Calls
(Bloomberg) -- Carlyle Group's publicly traded mortgage bond fund failed to meet margin calls and said it received a notice of default.
Carlyle Capital Corp. missed four of seven margin calls yesterday totaling more than $37 million, the Guernsey, U.K.- based fund said today in a statement. The fund expects to get at least one more notice of default related to the margin calls.
The collapse of the subprime mortgage market has prompted investors to flee all but the safest forms of debt, leading to the failure of hedge funds including Peloton Partners LLP. The Carlyle fund raised $300 million in July and used loans to buy about $22 billion of AAA rated so-called agency mortgage securities issued by Fannie Mae and Freddie Mac.
``The credit crisis is spilling over to the next asset class, agency bonds,'' said Philip Gisdakis, senior credit strategist at UniCredit SpA in Munich. ``There's never just one cockroach. If you see one highly leveraged hedge fund going bust, then there's another on the way.''
Peloton, the London-based hedge-fund firm run by former Goldman Sachs Group Inc. partners, announced plans last week to liquidate its ABS Fund after ``severe'' losses on mortgage-backed debt and demands from banks to repay loans. Thornburg Mortgage Inc. in Santa Fe, New Mexico, plummeted 62 percent in New York trading this week after the home lender received a default notice on a $320 million loan.
Widening Spreads
Carlyle Capital, run by John Stomber, fell 1.7 percent in Amsterdam trading today to $11.80. The fund originally sold shares at $19 each. Emma Thorpe, a London-based spokeswoman for U.S. private-equity firm Carlyle Group, declined to comment.
The agency mortgage-bond market has about $4.5 trillion of securities, according to estimates from UniCredit. The spread between 30-year agency mortgage bonds and 10-year U.S. Treasuries widened to more than 200 basis points yesterday, the highest since 1986, according to Bloomberg data cited by UniCredit today.
At the same time, money-market rates for euros and pounds climbed to the highest since mid-January, signaling the global squeeze on short-term bank lending may be returning. The three- month London interbank offered rate, or Libor, for euros advanced 1 basis point to 4.4 percent yesterday, the highest since Jan. 18, according to the British Bankers' Association.
``Market conditions are the worst anyone in this industry can remember,'' said Alain Grisay, chief executive officer of London-based F&C Asset Management Plc, on a conference call with reporters today. ``I don't think anyone has a recollection of a total disappearance in liquidity. I just cannot remember a time when for six months there are billion of dollars worth of assets out there for which there is just no market.''
Tuesday, March 4, 2008
Copper May Rise on Dollar Slide; Lead Gains to Four-Month High
(Bloomberg) -- Copper may advance in London on speculation declines in the dollar will accelerate investor demand for the metal used in plumbing and power plants.
The U.S. currency reversed gains and fell against the euro and declined for a sixth day against the yen. Copper has climbed 29 percent this year as an index of the dollar against six currencies including the euro and the pound has dropped 4.1 percent.
``The dollar is helping to support commodity prices,'' said Leon Westgate, a metals analyst at Standard Bank Ltd. in London. ``The main driver is money flow.''
Copper for delivery in three months gained $10 to $8,585 a metric ton as of 12:48 p.m. on the London Metal Exchange. Prices yesterday rose to $8,661, the highest since May 2006 when copper gained to a record $8,880 a ton.
The higher prices have curbed demand in China, the world's biggest user, said Eric Yan, head of China trade at Triland Metals Ltd. in London.
``If copper goes up to $10,000, Chinese demand will be dramatically reduced,'' he said. ``Chinese demand is quite weak and I don't think it will recover very soon.''
Nickel rose $400 to $33,600 a ton. Prices have climbed 15 percent since a strike began Feb. 28 at a Colombian mine owned by BHP Billiton Ltd. The workers are still on strike, Illtud Harri, a spokesman for BHP in London, said in an e-mail today.
Global nickel inventories in warehouses monitored by the London Metal Exchange dropped 120 tons to 47,592 tons, the exchange said today in its daily warehouse report. Supplies are little changed this year.
Read more at Bloomberg
Staples Net Income Falls 1% on Lower Retail Sales
(Bloomberg) -- Staples Inc., the world's largest office-supplies retailer, said fourth-quarter profit fell 1 percent on lower North American retail sales to small companies and consumers.
Staples dropped in Nasdaq Stock Market trading.
Net income declined to $333.2 million, or 47 cents a share, from $336.5 million, or 46 cents, a year earlier, Staples said today in a statement. Profit met some analysts' estimates. Revenue for the three months ended Feb. 2 rose less than 1 percent to $5.32 billion. Staples cut its full-year forecast.
Sales at U.S. and Canadian stores open at least a year dropped 6 percent. Office-supply retailers' sales slowed as customers concerned about a declining job market and the worst housing slump in a quarter century reduced purchases of copiers and desks. North American sales have also declined at smaller competitors such as Office Depot Inc.
``The environment is hitting everyone pretty hard,'' Walter Todd, who helps manage $800 million for Greenwood Capital Associates LLC in Greenwood, South Carolina, said yesterday in an interview. ``It's all macro-driven.'' The firm held 175,048 Staples shares as of Dec. 31.
The retailer predicted a ``mid single-digit'' percentage increase in sales and ``high single-digit'' percentage growth in earnings per share for the year ending next Jan. 31. Staples said in November that it expects earnings per share this year to increase by a percentage in the ``low teens,'' with ``high single-digit'' sales growth.
Staples Stock
Staples, based in Framingham, Massachusetts, fell 54 cents, or 2.4 percent, to $21.95 at 9:44 a.m. in Nasdaq Stock Market composite trading. The stock lost 2.5 percent of its value this year through yesterday, compared with a 20 percent decline for Office Depot, the second-largest office-supplies retailer.
``In the context of a tough retail environment, we view Staples as relatively stable,'' Jack Murphy, an analyst at William Blair & Co. in Chicago, wrote yesterday in a research note. He rates Staples shares a ``buy.''
Analysts estimated fourth-quarter profit of 47 cents a share, the average projection of 16 analysts surveyed by Bloomberg. Eleven analysts, on average, estimated sales of $5.4 billion.
In November, Staples forecast a ``low double-digit'' sales growth in the fourth quarter, with North American same-store sales unchanged or ``slightly negative.''
Dollar Falls Against Yen on Bets Fed Will Lower Rate 0.75-Point
(Bloomberg) -- The dollar fell for a sixth straight day against the yen and traded near a record low versus the euro as traders increased bets that the Federal Reserve will lower interest rates by 0.75 percentage point this month.
The U.S. Dollar Index, which compares the currency with those of six trading partners, dropped as futures showed a 74 percent likelihood the Fed will reduce rates to 2.25 percent. Last week, traders saw no chance of a cut that steep. Canada's currency fell after the Bank of Canada cut rates today to help offset a slump in exports to the U.S.
``The dollar will remain under pressure,'' said Omer Esiner, an analyst at currency-trading company Ruesch International Inc. in Washington. ``The U.S. economy is looking weak.''
The dollar fell to 103.08 yen at 9:10 a.m. in New York, from 103.49 yen yesterday, when it fell to 102.62 yen, the lowest since Jan. 28, 2005. The U.S. currency traded at $1.5202 per euro, from $1.5204 yesterday, when it touched $1.5275, the weakest level since the European currency's 1999 debut.
``Don't fight the dollar weakness,'' a team of strategists at Zurich-based UBS AG, led by Mansoor Mohi-uddin, wrote in a research report published today. This week's U.S. data ``will likely increasingly suggest a recession,'' they wrote.
The U.S. Dollar Index traded on ICE Futures in New York was at 73.584 after declining to a record low of 73.354 yesterday. The slump in the U.S. currency helped push the price of oil to a record of $103.95 yesterday and gold to an all-time high of $989.54 an ounce.
`Grossly Misaligned'
The yen advanced to 156.71 per euro from 157.35.
UBS Wealth Management Research, a unit of UBS, wrote in a separate report that the world's foreign-exchange markets are ``grossly misaligned'' and Asian currencies may ``appreciate sharply.''
The Singapore dollar reached S$1.3897 against the U.S. currency, a decade-high, before trading at S$1.3904, from S$1.3910 yesterday. The Taiwan dollar advanced 0.6 percent to NT$30.922 per dollar.
The Australian dollar, also known as the Aussie, fell as the central bank governor said there is evidence consumer spending is moderating. The central bank raised the main rate to 7.25 percent today, the highest in 12 years. The Aussie was at 93.29 U.S. cents, from 93.96 cents yesterday and 94.98 on Feb. 28, the highest since March 1984.
``The Australian dollar is likely to be sold hard in the near-term,'' Hans-Guenter Redeker, head of currency strategy in London at BNP Paribas SA, one of the world's 10 biggest currency traders, wrote in a note to clients. A support level at 92.75 cents per dollar ``looks set to be broken,'' he said.
Canadian Rates
The Canadian dollar fell to 99.36 Canadian cents per U.S. dollar, from 99 cents yesterday, after the central bank cut Canada's benchmark rate by a half-point to 3.5 percent and said further ``stimulus'' will likely be required.
Japan's currency also climbed 1.3 percent to 95.97 against the Aussie and 1 percent to 82.68 per New Zealand dollar as widening credit-market losses prompted investors to reduce so- called carry trades
Japan's benchmark rate of 0.5 percent, the lowest among industrialized nations, compares with 8.25 percent in New Zealand and 4 percent in Europe. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the difference between the two. The risk is that currency moves erase those profits.
Monday, February 25, 2008
Getty Images to be sold to Hellman & Friedman
Cheap Palm Oil May Overtake Soy on Rising Asia Demand
(Bloomberg) -- Palm oil, the world's most-used cooking oil, is also the cheapest, a discrepancy that won't last long as demand rises across Asia's biggest countries.
An ingredient in curries, stir-fries and Skittles candy, Malaysian palm oil costs 15 percent less than soybean oil on the Chicago Board of Trade. Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney, said the two may soon be even money, raising the prospect of at least a $1.5 million profit from a $10 million investment.
Rising incomes mean billions of people in Asia's developing economies seek palm oil for fried and processed foods, according to the U.S. Department of Agriculture. Crude oil at $100 a barrel is boosting demand for alternative fuels such as diesel from vegetable oil. As consumption rises, supply in China may drop after the worst snowstorms in five decades damaged rapeseed crops in January, the government reported.
``We may have a case of mass shortage of vegetable oil in China,'' said Rudolphe Roche, a manager at Schroders Plc's $6 billion agricultural commodities fund in London. ``This means they will continue to import from the rest of the world.'' Palm oil, produced in Malaysia and Indonesia, will benefit the most because its proximity to China lowers shipping costs, he said.
Rising prices will increase expenses at Nissin Food Products Co., Japan's biggest instant-noodle maker, and increase profits at Kuala Lumpur-based Sime Darby Bhd., the world's largest publicly traded owner of palm plantations. About 36 percent of the world's cooking oil comes from oil palm, more than any other plant, USDA data show.
The Precedent
``Ninety-three percent of all the palm oil in the world is going to food demand,'' William Doyle, chief executive officer of fertilizer maker Potash Corp. of Saskatchewan Inc., said in a Feb. 19 interview. ``It's enormously powerful, and we don't see this backing off.''
The last time palm oil was this cheap, in April 2007, prices rallied for two months because of increasing demand, gaining 38 percent to 2,855 ringgit ($889) a metric ton on the Malaysia Derivatives Exchange to reach parity with Chicago prices. Contracts for May delivery ended at 3,698 ringgit a ton (52 U.S. cents a pound) on Feb. 22 in Malaysia. May soybean oil finished at 63.02 cents a pound on the CBOT.
Palm oil and soybean oil reached records today. Palm oil rose as much as 5.8 percent to 3,914 ringgit a ton and closed 4.5 percent higher at 3,866 ringgit, the biggest gain since Dec. 26, 2006. Soybeans advanced as much as 2.4 percent to 64.52 cents a pound and last traded at 64.29. That narrowed palm oil's discount to 16 percent from 17 percent.
Food Inflation
``There is no reason why the price of soybean oil and palm oil cannot be the same,'' said Edgare Kerwijk, chief financial officer for Biox Group BV in Rotterdam, which has put on hold plans for three biodiesel projects in the Netherlands and the U.K. due to higher prices. ``The discount will narrow'' for palm oil, he said.
U.S. manufacturers will increase consumption of soybean oil for energy by 22 percent to 3.4 million pounds in the year ending November, the USDA forecasts. The total equals 16 percent of U.S. use.
Soaring food prices are fueling inflation. China's consumer- price gains accelerated to 7.1 percent in January, the fastest pace in more than 11 years, the statistics bureau said Feb. 19. U.S. inflation quickened to 4.3 percent in January from 4.1 percent in December, the Labor Department said Feb. 20.
China's January snowstorms and rains, the worst in 50 years, affected as much as 48 million mu (7.9 million acres) of rapeseed crops, almost half the total area planted, the China National Grain and Oils Information Center said Feb. 14.
China, U.S.
China, the biggest annual buyer of cooking oils, raised palm oil imports 18 percent in January to 360,000 metric tons, compared with a year earlier, according to customs figures. India boosted imports 75 percent to 366,353 tons that month, and imports of all cooking oils may gain 15 percent to 5.4 million tons in the year ending Oct. 31, according to a Bloomberg News survey of six traders and analysts.
``With the strong demand coming from the substitution effect this year, the discount should narrow further from here,'' said Ben Santoso, a plantations analyst at the brokerage arm of DBS Group Holdings, Singapore's largest bank. He said palm oil may reach the same level as soy by June.
Even the U.S., the world's largest soybean grower and exporter, is buying more palm oil. Soyoil is hydrogenated in some foods to make them last longer on store shelves, a process resulting in trans-fats that may raise the risk of heart disease, according to the Food and Drug Administration.
``Trans-fats are a big reason for more palm oil imports,'' Anne Frick, a senior oilseed analyst for Prudential Financial Inc. in New York, said in a Feb. 20 e-mail.
Ambac Rises on $3 Billion Rescue to Avert Downgrade
(Bloomberg) -- Ambac Financial Group Inc. rose to the highest in two weeks on investor expectations the bond insurer may be rescued from crippling credit-rating downgrades by getting $3 billion in new capital.
Ambac, the second-biggest bond insurer after MBIA Inc., may announce an agreement this week, according to a person with knowledge of the discussions who declined to be named because the details aren't complete. The New York-based company plans to raise $2.5 billion by selling stock at a discount to existing shareholders and $500 million from issuing debt, the Wall Street Journal reported today, citing people familiar with the matter.
``Maybe we'll see light at the end of the tunnel soon,'' said Geraud Charpin, head of European credit strategy at UBS in London. ``That would be good news for banks.''
Citigroup Inc. and seven other banks are working with Ambac to prevent rating cuts that would throw doubt on the credit quality of the $553 billion of municipal and asset-backed securities it guarantees. Banks stand to lose as much as $70 billion from any downgrades to Ambac, MBIA Inc. and FGIC Corp., Oppenheimer & Co. analysts estimated. Ambac rose as much as 6 percent before the official start of trading in New York.
The stock was 69 cents higher at $11.40 at 7:35 a.m., the highest since Feb. 11. Ambac jumped 16 percent in New York Stock Exchange trading on Feb. 22 after CNBC Television said banks and Ambac were preparing a deal.
Ambac spokeswoman Vandana Sharma didn't return a voicemail and e-mail seeking comment before office hours today.
Bank Talks
Rating companies are demanding bond insurers add more capital or face downgrades because of losses on subprime- mortgage securities they guaranteed. Moody's Investors Service indicated it will decide whether to cut Ambac and Armonk, New York-based MBIA by the end of the month. A downgrade of all the firms would cast doubt on $2.4 trillion of securities they back.
New York Insurance Superintendent Eric Dinallo last month arranged a meeting with banks to help avoid a downgrade of the bond insurers. Dinallo told a congressional hearing this month that the companies may be forced to separate their municipal insurance business from their asset-backed guarantees.
``Ambac was among the neediest cases, so if they can pull it off, there's hope for the others,'' said Jim Reid, credit strategist at Deutsche Bank AG in London.
CDO Losses
Banks face losses from any rating cuts because they bought bond insurance to hedge the risks of collateralized debt obligations and other asset-backed securities that are now tumbling in value. CDOs package pools of securities then split them into pieces with different ratings.
UBS AG, Royal Bank of Scotland Group Plc, Wachovia Corp., Barclays Plc, Societe Generale SA, BNP Paribas SA and Dresdner Bank AG were also involved in the group discussing a rescue, said the person.
Dresdner, the German banking arm of Allianz SE, will contribute a ``small'' investment of ``two-digit million euros,'' Stefan Jentzsch, head of the Dresdner Kleinwort investment-banking unit, said at a press conference in Frankfurt today.
``We have long been waiting for banks to pay up,'' Philip Gisdakis, a Munich-based credit analyst at UniCredit SpA, Italy's biggest bank, wrote in a note to investors today. A ``solution without their participation would lead to large losses for them.''
Spokespeople for Citigroup, UBS, Wachovia and BNP declined to comment on the rescue plans. Spokespeople for RBS, Barclays and Societe Generale didn't immediately return e-mails or calls seeking comment.
FGIC Split
FGIC, which lost its top rating at Moody's last week, asked to be split into two separate businesses, one that insures municipal bonds and another for asset-backed securities. That would help protect municipal bonds from losses on the asset- backed debt.
Channel Reinsurance Ltd., a reinsurer for MBIA, had its top Aaa credit rating cut by Moody's on Feb. 22 because of a slump in the value of residential mortgage securities.
The rating was cut three levels to Aa3 with a negative outlook, Moody's said in a statement. Channel Re provides more than half the reinsurance bought by MBIA, according to MBIA filings. MBIA said last week all bond insurers must eventually divide their businesses.
Visa May Raise as Much as $17 Billion in Initial Sale
(Bloomberg) -- Visa Inc. may raise as much as $17 billion in what would be the biggest U.S. initial public stock offering.
Visa, the world's largest payment-card network, plans to sell 406 million Class A shares for $37 to $42 each, the San Francisco-based company said in a regulatory filing today. Banks have the option of selling an additional 40.6 million shares, pushing the potential size of the deal to $18.8 billion.
The company is trying to replicate the success of its smaller rival, MasterCard Inc., whose shares have surged more than fivefold since a May 2006 IPO. Demand for initial public offerings has waned this year, with 97 companies raising $12 billion, or 43 percent less than in the same period last year, according to data compiled by Bloomberg.
At the high end of the projected range, Visa's transaction would be the world's second-biggest IPO, after the $22 billion raised by Industrial & Commercial Bank of China Ltd. in 2006.
Thursday, February 21, 2008
Reed to buy ChoicePoint, sell info division
(Reuters) - Reed Elsevier announced the acquisition of U.S. risk-management business ChoicePoint Inc for $4.1 billion including debt alongside its results, as well as a renewed cost-savings drive and the planned sale of an advertising-dependent information business.
Shares in Anglo-Dutch publisher Reed, which have outperformed the DJ Stoxx European media sector by 5 percent over the past year, jumped 6 percent to 619 pence on the news on Thursday.
The $4.1 billion for ChoicePoint comprises $3.5 billion in cash for the equity, at $50 per share, and 600 million pounds in debt. CheckPoint shares closed at $33.66 on Wednesday.
Reed said that combining ChoicePoint with its LexisNexis risk-information and its Analytics group would create a risk-management business with $1.5 billion in revenue and a leading position in a fast-growing market.
The London-based company said buying ChoicePoint had the unanimous backing of the U.S. company's board and now required shareholder and regulatory approval. ChoicePoint is based in Alpharetta, Ga. and employs around 5,500 people.
Reed also announced that it would divest its Reed Business Information (RBI) arm to reduce its exposure to cyclical advertising markets. The Reed exhibitions business will be kept.
Advertising accounts for around 60 percent of revenues at RBI, which itself generates around 20 percent of Reed's 4.6 billion pound group revenues.
Auction Debt Succumbs to Bid-Rig Taint as Citi Flees
(Bloomberg) -- The collapse of the auction-rate bond market, where state and local governments go to raise cash, demonstrates that regulators are no match for Wall Street.
Hundreds of auctions have failed this month, sending borrowing costs as high as 20 percent because dealers from Goldman Sachs Group Inc. to Citigroup Inc., UBS AG and Merrill Lynch & Co. stopped using their own capital to support the sales. Regulators, who allowed the manipulation of bids and lack of information to persist even after two probes in the past 15 years, are now watching a $342 billion market evaporate at the expense of taxpayers.
Inadequate disclosure ``may have masked the impact of broker-dealer bidding on rates and liquidity,'' Martha Haines, head of the Securities and Exchange Commission's municipal office, said in an interview. ``The large numbers of recent auction failures, which are reported to have occurred due to a reduction in bidding by broker-dealers, appears to indicate those concerns were well founded.''
Citizens Property Insurance of Tallahassee, Florida, a state-run insurer that protects homeowners against hurricane losses, is a casualty. The rate Citizens pays on a portion of the $4.75 billion in securities it has sold jumped to 15 percent from 5 percent at an auction run by UBS that failed on Feb. 13.
No `Backstop'
``The banks were the backstop,'' said Sharon Binnun, the chief financial officer of Citizens. ``If you had more sell orders than buy orders, they'd pick up the difference and you wouldn't have a failed auction.''
Officials at Goldman, Citigroup, UBS and Merrill declined to comment. All the firms are based in New York, except UBS, which is located in Zurich. UBS told its brokers this month that it won't buy bonds that fail to attract enough bidders, and Merrill said it was reducing its purchases.
Auction-rate securities are long-term bonds whose interest resets every seven, 28 or 35 days at bidding run by a dealer who collects a fee of about 25 basis points. Unlike Treasuries or stocks, there is no daily source of information about auction- rate bonds. Issuers have relied on banks to be buyers of last resort when bidders couldn't be found at their auctions.
Since the first of the securities were sold in 1984 for American Express Co., the market has expanded as investors sought the bonds as a higher-yielding alternative to money funds.
SEC Fines
Along the way, New York-based Lehman Brothers Holdings Inc. was fined $850,000 in 1995 by the SEC for manipulating auctions conducted for American Express. Almost two years ago, 15 securities firms paid the SEC $13 million to settle claims of bid-rigging in auction-rate bonds. The banks neither admitted nor denied wrongdoing.
While the SEC required dealers to disclose that they may use insider knowledge to place bids, they don't have to say how frequently they bid or how much. Dealers also aren't obligated to disclose rates on auction debt when the securities trade.
The settlement didn't go far enough because it still deprives investors of information they need to make informed bids, said Joseph Fichera, chief executive of Saber Partners LLC, an advisory firm in New York.
``Investors aren't sure they can sell the bonds when they want,'' Fichera said.
Aside from the fines, the market worked smoothly until November, when investors began pulling back from all except the safest of government debt as losses on securities tied to subprime mortgages began infecting other parts of the credit market.
Subprime Contagion
Wall Street firms, reeling from $146 billion in losses on their debt holdings, became unwilling to commit their own capital to support auctions that don't attract enough bidders.
``It's more a liquidity issue, I don't think there's a concern here about these entities being able to repay their debts,'' said Tony Crescenzi, chief bond-market strategist in New York at Miller Tabak & Co., in an interview today with Bloomberg Radio. ``These auction-rate securities are proving to no longer be viable, and we'll see them diminish in scope and size as we go forward.''
A month ago, it was ``unthinkable'' that the banks wouldn't intervene to support auctions, said Steven Brooks, executive director of the North Carolina State Education Assistance Agency. ``I had certainly hoped and believed that that liquidity was there and was an important part of why this marketplace was good for investors and good for issuers.''
From 1984 through 2006, only 13 auctions failed, typically because of changes in the credit of the borrower, according to Moody's Investors Service. There were 31 failures in the second half of 2007, and 32 during a two-week period beginning in January.
`Ugly' Market
``It's ugly,'' said Luis I. Alfaro-Martinez, finance director for the Government Development Bank of Puerto Rico, which saw the rate it pays on $62 million of debt rise to the maximum of 12 percent set out in documents governing the bonds, from 4 percent at a Feb. 12 auction handled by Goldman. ``It's getting uglier.''
The average rate for seven-day municipal auction bonds rose to a record 6.59 percent on Feb. 13 from 4.03 percent the previous week, according to indexes compiled by the Securities Industry and Financial Markets Association.
The higher rates drove California, the biggest borrower in the municipal bond market, to decide to replace $1.25 billion of auction-rate bonds with traditional debt.
Philadelphia Fed February Factory Index Falls to -24
(Bloomberg) -- Manufacturing in the Philadelphia region unexpectedly contracted the most since February 2001, the eve of the last recession, as measures of new orders and shipments reflected weakening demand.
The Federal Reserve Bank of Philadelphia's general economic index declined to a minus 24 from minus 20.9 in January, the bank said today. Readings less than zero signal contraction. The Philadelphia Fed's general economic index averaged 5.1 in 2007.
A two-year housing slump, exacerbated by tighter credit conditions, is spilling over to other industries, pushing the economy to the brink of recession. The Fed, after cutting interest rates at the fastest pace since 1990 last month, has said it is ready to move in a ``timely'' manner to avert a downturn.
``The Philadelphia Fed survey is sending clear signals that the U.S. economy is heading for a recession,'' said Lena Komileva, chief economist at Tullett Prebon in London, who forecast a minus 25 reading. ``The speed and magnitude of the recent decline in the series signals a very sharp deterioration.''
Economists had forecast the Philadelphia manufacturing index would rise to minus 10.0, according to the median of 54 estimates in a Bloomberg News survey. Projections ranged from 0 to minus 25.0.
New Orders
The Philadelphia Fed's measure of new orders rose to minus 10.9 from minus 15.2 the prior month, and a measure of shipments fell to minus 12.2 from minus 2.3 the prior month.
A gauge of unfilled orders dropped to minus 10.9 from minus 6.2, while the index of inventories declined to minus 13 from minus 11.7 the prior month.
The employment index gained to 2.5 from minus 1.5 a month earlier, the Philadelphia Fed said. An index of prices paid dropped to 46.6 from 49.8, while a gauge of prices received weakened to 24.3 from 32.
The report provides one of the month's earliest clues to the state of manufacturing nationwide. Similar data from the New York Fed released last week showed manufacturing contracted in the New York region in February for the first time in almost three years.
The Philadelphia Fed region, which comprises eastern Pennsylvania, southern New Jersey and Delaware, is more vulnerable to the auto slump and less exposed to financial services and trade than the New York region, economists said.
Nationwide Measure
Nationwide, manufacturing grew in January after contracting in December by the most in almost five years, according to a Feb. 1 survey from the Institute for Supply Management. The ISM survey on manufacturing in February is due out March 3.
The index measuring the manufacturing outlook for six months from now fell to minus 16.9 from 5.2, today's report showed.
The Fed's January rate cuts came as rising subprime defaults led to a global tightening of credit standards and declines in equity prices. Investors are betting on a half-point rate reduction, to 2.5 percent, at the March 18 Fed meeting.
The U.S. economy will probably grow at a 0.5 percent pace in the first quarter and a 1 percent rate in the following three months, according to the median forecast in a Bloomberg survey of economists taken the first week of February. Economists surveyed said a recession this year was an even bet.
Wednesday, February 20, 2008
AT&T, Verizon May Fall Further as Flat Rates Portend Price War
(Bloomberg) -- AT&T Inc. and Verizon Communications Inc. declined for the second straight day in New York trading after adopting flat-rate mobile calling plans that could be the opening salvos in a price war.
AT&T and Verizon Wireless, the two top U.S. wireless carriers, announced plans yesterday to sell unlimited calls for a flat fee of $99.99 a month. Credit Suisse cut its ratings on shares of AT&T and Verizon Communications, co-owner of Verizon Wireless. Robert W. Baird & Co. lowered its AT&T rating to match its neutral stance on Verizon Communications.
The unlimited plans, including another announced by T-Mobile USA Inc., pose a competitive challenge as U.S. mobile carriers already struggle to reach the remaining fifth of Americans that don't yet have a wireless phone. While analysts estimated the new rates may not hurt sales, they worried about future price cuts.
``There's no going back,'' said Credit Suisse's Christopher Larsen, who cut AT&T and Verizon shares to a neutral rating from the equivalent of a buy recommendation. ``It's extremely unlikely prices go up from $99, so now you've created a ceiling for what unlimited pricing will be.''
AT&T, based in San Antonio, fell $2.41, or 6.7 percent, to $33.48 at 10:13 a.m. in New York Stock Exchange composite trading, the biggest drop in five years. The shares lost 5.3 percent yesterday. New York-based Verizon declined $1.60, or 4.5 percent, to $33.74, extending yesterday's 6.6 percent loss.
While the pricing plans may only affect the less than 5 percent of subscribers who pay more than $100 a month, they will convince more customers to replace their home phones with mobile handsets, said Larsen, who is based in New York.
Upper Tier
The plans announced yesterday aim at the upper tier of customers who spend about twice what an average mobile-phone user paid last quarter, as reported by AT&T and Verizon.
The new rate plans reminded Stanford Group Co.'s Michael Nelson of the day the old AT&T Wireless began selling local and long-distance service for one price.
``It turned the wireless industry upside down,'' the New York-based analyst said in an interview yesterday. ``It caused all the carriers to come up with completely new calling plans, to really revisit their entire business models.''
The flat-rate movement ``raises the risk profile for a pricing war across the entire industry,'' said Nelson.
The former AT&T Wireless, which is now part of AT&T's mobile-phone unit, started its Digital One Rate plan in 1998, erasing the distinction between local and long-distance calls on mobile phones, keeping rates flat regardless of the caller's location.
Port Authority Auction Bonds Reset at 8% After Surge
(Bloomberg) -- Interest rates on $100 million of bonds issued by the Port Authority of New York and New Jersey were set at 8 percent in a weekly auction after surging to 20 percent on Feb. 12.
Rates had soared from 4.3 percent when too few buyers bid for the so-called auction-rate debt and Goldman Sachs Group Inc., which runs the auction, refused to put up its own capital to buy unwanted securities. That caused the yield to be set at a level predetermined in bond documents. Rates fell yesterday as the prospect of high yields enticed investors, according to data compiled by Bloomberg.
Rates in the more than $300 billion market for auction-rate debt are rising after banks including Citigroup Inc. and Goldman stopped bidding for the debt at periodic sales they oversee, prompting hundreds of so-called failures. Some investors, including OppenheimerFunds Inc., see an opportunity in the turmoil and are buying the bonds.
``Twenty percent was such an unusually high number,'' said Judy Wesalo Temel, director of credit research at Samson Capital Advisors LLC, a fixed-income manager in New York. ``I wouldn't say that the whole market has calmed down or has even begun to function normally yet. It hasn't.''
Yesterday, a Citigroup-run auction of $25 million of federally taxable debt issued by Vermont's student loan agency failed, causing the rate to remain at 18 percent for the second week in a row. The debt paid 4.5 percent as recently as Feb. 11.
Port Authority Rates
The 8 percent rate on the federally taxable Port Authority debt is still above the range of 4 percent to 5.70 percent the agency paid until this month. Port Authority Treasurer Anne Marie Mulligan didn't return a call for comment; Goldman spokesman Michael DuVally declined to comment.
Auction-rate bonds are long-term debt with interest rates that reset according to bids submitted through securities firms every seven, 28 or 35 days. When there aren't enough bids, the auction fails and the rate is set at a level spelled out in bond documents. Investors who expected to sell the debt are left holding the securities.
Until the past two weeks, bankers who ran auctions prevented failures by purchasing bonds for their own account, though they weren't required to do so. Investors grew wary of relying on bankers to support auctions as the investment firms reported more than $146 billion of losses and writedowns.
Rising Average
The average rate for seven-day municipal auction bonds rose to a record 6.59 percent on Feb. 13 from 4.03 percent the previous week, according to indexes compiled by the Securities Industry and Financial Markets Association.
Regulators allow dealers to bid when they choose, and to control auction information as long as they disclose that they might submit bids. Bankers don't have to say how often they buy or how much, and aren't required to make public the range of bids or when auctions fail.
Last week, New York Governor Eliot Spitzer cited the high rate on the Port Authority's auction-rate bonds in testimony on bond insurers before a House subcommittee on Capital Markets, Insurance and Government. Insurers such as MBIA Inc. and Ambac Financial Group Inc. that back the debt are struggling to raise capital after taking more than $8 billion in writedowns related to mortgage-linked securities they guaranteed.
``The higher max rate stuff is starting to get some traction,'' said Matt Dalton, chief executive officer of Belle Haven Investments, a money management firm based in Greenwich, Connecticut.
Massachusetts Tolls
Drivers on the Massachusetts Turnpike may face higher tolls after the state was unable to sell auction-rate securities backed by a unit of Ambac, according to state officials. The turnpike is now trying to buy a letter of credit from State Street Bank and Trust Co. and KBC Group NV so it can sell variable-rate demand obligations by mid-March instead of auction-rate securities, an advisor for the Turnpike told the agency's board yesterday.
``That is a very significant financial obligation, probably our biggest short-term problem,'' Alan LeBovidge, the turnpike authority's executive director, said at the state agency's monthly board meeting yesterday.
Auction-Rate Proposal
The Securities and Exchange Commission fined banks in a settlement over bid-rigging two years ago. The U.S. municipal bond market's main regulator, the Municipal Securities Rulemaking Board, plans to propose rules requiring banks to disclose more, including the rate, bidding details and information about failures.
Auction-rate securities were introduced in the corporate market in 1984, when American Express Co. sold $300 million of auction preferred stock. The securities, devised by Ronald Gallatin, a retired managing director at Lehman Brothers Holdings Inc., then Shearson Lehman, were used by banks and other companies before auction difficulties prompted many companies to move away from them.
American Express retired its issue in 1991-1992, and in 1995 Lehman was fined $850,000 by the SEC for manipulating auctions conducted for American Express.
The first failed auction in the municipal market occurred in 1990 for bonds issued by the Pima County, Arizona, Industrial Development Authority for Tucson Electric Power Co., now a unit of UniSource Energy Corp., based in Tucson.
Tuesday, February 19, 2008
MBIA Former Chief Returns as Credit Rating Cut Looms
(Bloomberg) -- MBIA Inc., the world's largest bond insurer, brought back former Chief Executive Officer Joseph Brown to run the company and expedite talks with regulators to help preserve its AAA credit rating.
Gary Dunton, who succeeded Brown as CEO in 2004 and added the title of chairman last year, will leave the company, Armonk, New York-based MBIA said today in a statement.
Brown, 59, will be tasked with forging a plan to restructure and revive MBIA, which has recorded losses of more than $5 billion on subprime-mortgage securities, threatening its credit rating and sending its shares plunging 83 percent in the past year. New York Insurance Superintendent Eric Dinallo said last week bond insurers may need to be split into two businesses to protect more than $1 trillion of insured municipal debt from subprime losses.
``MBIA faces meaningful challenges,'' Brown said in the statement. Brown said he is seeking to ``frame a new model,'' for MBIA.
Brown said he has already discussed MBIA's plans with Dinallo who provided ``helpful guidance.'' Dinallo, who is taking the lead among the nation's insurance regulators, brought in Warren Buffett to start a new insurer and also asked the billionaire investor to value the guarantors' municipal business.
Insurers Splitting
FGIC Corp., the third-largest bond insurer, sought permission to split up last week. Dinallo said MBIA and Ambac Financial Group Inc., the market leaders, may do the same if they can't raise capital.
The companies and Security Capital Assurance Ltd. insure about $580 billion of asset-backed debt, including collateralized debt obligations that package bonds into new securities.
MBIA, New York-based Ambac and FGIC of New York are struggling after more than $8 billion in losses tied to the slumping value of subprime debt.
MBIA rose 53 cents to $12.77 in early New York Stock Exchange trading. Ambac, down 88 percent this year, fell 24 cents to $9.98. FGIC is owned by New York-based leveraged buyout firm Blackstone Group LP and mortgage insurer PMI Group Inc. of Walnut Creek, California.
Under Dunton, 52, MBIA sold about $2.5 billion in the sale of shares and notes in the past three months.
Medco profit tops estimates
(Reuters) - Medco Health Solutions Inc (MHS.N: Quote, Profile, Research) reported better-than-expected quarterly earnings on Tuesday, helped by sales of generic drugs, and the pharmacy benefit manager boosted its full-year profit forecast, sending its shares higher.
Medco, which derives more than half its profit from home delivery of generic medicines by mail, said its rosier outlook reflected confidence in its fundamentals, new business, and more generics becoming available sooner than anticipated.
Pharmacy benefit managers (PBMs), which administer prescription drug benefits for employers and health plans and operate large mail-order pharmacies, have profited from the availability of low-cost generic versions of popular drugs.
Morgan Stanley analyst David Veal said in a research note, "Another quarter of solid growth, when coupled with higher guidance, affirm our positive view of the PBM industry and should offer relief for the high level of investor nervousness around the quarter."
After a huge gain in 2007, Medco shares were down 3 percent this year through Friday's close, compared with a 13 percent drop for rival Express Scripts Inc (ESRX.O: Quote, Profile, Research). Medco shares rose 4 percent to $51 in pre-market trading on Tuesday.
Fourth-quarter net income fell 9 percent to $207.6 million, or 38 cents per share, from $228.8 million, or 39 cents per share, a year earlier.
The latest results were hurt by higher-than-expected costs tied to new clients and expenses related to two acquisitions. The year-earlier earnings were boosted by the temporary availability of a generic version of a popular blood thinner.
Penny-pinching shoppers boost Wal-Mart profit
(Reuters) - Wal-Mart Stores (WMT.N: Quote, Profile, Research) posted better-than-expected quarterly profit on Tuesday as penny-pinching U.S. shoppers scoured its discount stores for low prices on necessities like food to offset tough economic conditions.
"We know that the economy remains a critical factor in this new fiscal year," said Lee Scott, CEO of the world's largest retailer, in a statement. "Customers were more cautious in their spending in January."
For the first quarter, it forecast sales at its U.S. stores open at least a year, a key retail gauge known as same-store sales, to be flat to up 2 percent, citing the "challenging" economic environment.
Net income rose 4 percent to $4.096 billion, or $1.02 per share, for its fiscal fourth quarter ended January 31, from $3.94 billion, or 95 cents per share, a year earlier.
The most recent quarter's results included charges of 3 cents per share for dropped real estate projects and a restructuring charge for its Japanese operations, and a 1 cent per share benefit from the sale of certain real estate properties.
Excluding the items, Wal-Mart reported earnings of $1.04 per share, above analysts' average estimate of $1.02 per share, according to Reuters Estimates.
Monday, February 18, 2008
Euro zone growth may be weaker than hoped: Noyer
(Reuters) - European Central Bank (ECB) Governing Council member Christian Noyer said in an interview released on Sunday euro zone growth might be weaker than hoped as a result of market turmoil but he saw no "big setback."
In an interview with the Financial Times newspaper, Noyer said French banks' exposure to the U.S. subprime market was lower than others' and the European Union economy should resist financial turmoil better than that of the United States.
"Growth may be weaker than we hoped but I don't see a big setback," Noyer said when asked about the impact of the subprime crisis on the European economy.
ECB President Jean-Claude Trichet warned after the last rate meeting on February 7 that the euro zone economy might grow slower than potential in 2008.
In December ECB economists forecast 2008 growth of around 2 percent, but a number of ECB policymakers have suggested this might need to be revised down when fresh projections are published in March.
"If we are a little bit below potential, but still close to the average we've had for a number of years... I don't think that makes (structural) reforms impossible," Noyer said in a transcript of the interview released ahead of publication in Monday's edition.
Toshiba to give up on HD DVD, end format war: source
(Reuters) - Toshiba Corp (6502.T: Quote, Profile, Research) is planning to give up on its HD DVD format for high definition DVDs, conceding defeat to the competing Blu-Ray technology backed by Sony Corp (6758.T: Quote, Profile, Research), a company source said on Saturday.
The move will likely put an end to a battle that has gone on for several years between consortiums led by Toshiba and Sony vying to set the standard for the next-generation DVD and compatible video equipment.
The format war, often compared to the Betamax-VHS battle in the 1980s, has confused consumers unsure of which DVD or player to buy, slowing the development what is expected to be a multibillion dollar high definition DVD industry.
Toshiba's cause has suffered several setbacks in recent weeks including Friday's announcement by U.S. retailing giant Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) that it would abandon the HD DVD format and only stock its shelves with Blu-ray movies.
A source at Toshiba confirmed an earlier report by public broadcaster NHK that it was getting ready to pull the plug.
"We have entered the final stage of planning to make our exit from the next generation DVD business," said the source, who asked not to be identified. He added that an official announcement could come as early as next week.
No one answered the phone at Toshiba's public relations office in Tokyo.
Westland/Hallmark Recalls Record Amount of U.S. Beef
(Bloomberg) -- Westland/Hallmark Meat Co., the supplier of ground beef to U.S. school lunch programs, recalled a record 143.4 million pounds of meat after the government said it was unfit for humans.
The company, based in Chino, California, withdrew all raw and frozen products made since Feb. 1, 2006, because some of the cattle weren't fully inspected, the Department of Agriculture said in a statement yesterday. A total of 37 million pounds went to nutrition programs, including schools, since October 2006.
The order relates to so-called downer cattle discovered between the normal USDA inspection before slaughter and the killing of the animals, the department said. Downer cattle, those unable to walk, are banned from the food chain as a precaution against Bovine Spongiform Encephalopathy, also known as mad-cow disease, the USDA said.
The risk of consumers contracting BSE from the meat is ``negligible,'' the USDA said in a separate statement. ``The prevalence of the disease in the United States is extremely low,'' with two animals testing positive for the disease out of 759,000 tested nationwide since June 2004, the department said.
A video taken at the plant released by the Humane Society of the U.S. shows workers kicking cows and using electric prods and forklifts to make them move. Two Westland/Hallmark former employees were charged with animal cruelty by the San Bernardino District Attorney's office Feb. 15.
Operations Ceased
The company ceased operations last month after the video was revealed. In a statement posted on the company's Web site Feb. 3, Westland/Hallmark president Steve Mendell said the company was cooperating fully with the USDA. Two messages left yesterday with Westland/Hallmark seeking comment weren't immediately returned. Today is a U.S. public holiday.
The U.S. consumed 28 billion pounds of beef in 2006 and the U.S. beef industry was worth $71 billion that year on a retail basis, according to the USDA. Beef exports totaled 1.15 billion pounds worth $1.63 billion.
The recall shouldn't create a supply problem, Kim Essex, vice president of communications at the National Cattlemen's Beef Association, said in a Bloomberg Television interview from Denver today. ``I am very confident in the safety of the beef supply,'' she said.
The recalled meat is considered a low risk to food supply because almost all the meat has either been consumed or is being held from distribution, Richard Raymond, USDA under secretary for food safety, said in a teleconference call yesterday.
Hamburger Patties
The ground beef bought for schools was processed into products such as hamburger patties, chili meat and taco meat, Bill Sessions from the USDA's Agricultural Marketing Service, said on the call, according to a transcript.
The recall is categorized as a Class II, meaning ``there is a remote probability of adverse health consequences from the use of the product,'' according to Raymond.
The recall is more than four times the size of the previous record, a 35 million-pound removal of Thorn Apple Valley Inc. ready-to-eat meats potentially contaminated with listeria in January 1999, Raymond said.
``All of the larger recalls done in the past were all Class I,'' Raymond said. ``In this one we feel there is a very, very remote possibility of anyone suffering health consequences.''
About 150 U.S. school districts are no longer using beef from Hallmark Meat Packing Co., the Associated Press reported, without saying where it got the information.
Kidney Exports
Schools in Washington state and California said they wouldn't serve students beef for now, Agence France-Presse reported, citing unidentified local officials.
Hamburger patties and meatballs in schools in South Florida are being destroyed as part of the recall, the South Florida Sun- Sentinel newspaper reported, without saying where it got the information.
Westland/Hallmark's exports last year consisted of kidneys and livers to Ivory Coast and livers to Angola, the USDA said. There have been no exports to Japan or South Korea since at least 2003, the department said.
Japan and South Korea banned U.S. beef imports after the first U.S. case of mad-cow disease was found in 2003. Japan, once the largest U.S. beef export market, now only imports meat from animals aged 20 months or younger, which have a lower risk.
The 27-nation European Union only imports hormone-free beef from the U.S., which has to be produced separately from other livestock, Michael Mann, a spokesman for agriculture and rural development at the European Commission, said by telephone today. The EU exported 87 tons of beef to the U.S. in 2006.
Friday, February 15, 2008
Bond insurer FGIC asks to split in two
(Reuters) - FGIC Corp, a bond insurer whose main unit has lost its top credit ratings from all three agencies, has told New York regulators it wants to split into two companies, New York Insurance Superintendent Eric Dinallo said on Friday.
The company would be split into a municipal bond insurer and a structured finance insurance company, in a "good-bank/bad-bank" plan that would split off the relatively safe business of insuring municipal debt from the riskier business of guaranteeing repackaged mortgages and other debt.
U.S. January Import Prices Rise More Than Forecast
(Bloomberg) -- Prices of goods imported into the U.S. rose more than forecast in January, pushing the increase for the last 12 months to a record, led by rising costs for energy products and food.
The 1.7 percent increase in the import price index followed a revised 0.2 percent decrease the prior month, the Labor Department reported today in Washington. Prices excluding petroleum rose 0.6 percent.
Higher import costs, sustained over several months, may increase the chances U.S. companies will try to follow their foreign competitors in increasing prices. Still, Federal Reserve policy makers remain focused on risks to growth and are prepared to lower interest rates further, Chairman Ben S. Bernanke told U.S. lawmakers yesterday.
``Growth is still the biggest worry, but inflation concerns are alive,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``The Fed will be cutting interest rates.''
Import prices were forecast to rise 0.5 percent, according to the median estimate of 52 economists in a Bloomberg News survey, after being previously reported as unchanged in December. Forecasts ranged from a gain of 2 percent to a drop of 1 percent.
Treasury Yields
Treasury securities, which rose earlier today, stayed higher after the figures. Ten-year note yields were at 3.76 percent at 8:38 a.m. in New York, from 3.82 percent late yesterday.
Compared with a year earlier, prices of imported goods increased 13.7 percent, the biggest jump since record-keeping began in 1982. That followed a 10.4 percent year-over-year increase in the prior month. Excluding petroleum, prices rose 3.6 percent in the 12 months to January.
The import-price index is the first of three monthly price gauges from the Labor Department. The government is scheduled to release its measure of consumer prices on Feb. 20 and wholesale prices on Feb. 26. Both reports are forecast to show that excluding fuel costs, price pressures were contained.
Fed officials have trimmed forecasts for growth after the U.S. lost jobs in January and consumer spending slowed because of falling home and stock values and rising energy costs. The central bank will cut rates a further half-point by March 18 after 2.25 percentage points of reductions since September, futures trading shows.
Bernanke Message
``The outlook for the economy has worsened in recent months, and the downside risks to growth have increased,'' Bernanke told the Senate Banking Committee in Washington yesterday. ``To date, inflation expectations appear to have remained reasonably well anchored.''
The price of imported petroleum and petroleum products rose 5.5 percent after a decline of 1.9 percent the prior month. Prices were 67 percent higher than at the same time a year earlier.
Crude oil prices, which reached $100 a barrel on Jan. 2 on the New York Mercantile Exchange, the highest since trading began in 1983, have retreated in recent weeks.
Excluding all fuels, including natural gas, import prices rose 0.7 percent for the month and were up 3.3 percent for the 12-month period.
Food and beverage imports were 3.1 percent more expensive, the biggest gain since March 2005. Costs of imported industrial supplies rose 4 percent and were up 37 percent from a year earlier, the biggest year-over-year increase since March 2000.
Dollar Falls
The dollar, which weakened nearly 8 percent since the beginning of 2007 against a trade-weighted basket of currencies of major U.S. trading partners, also is making imports more expensive.
The cost of imported capital goods fell 0.2 percent, the first decrease in nine months, today's report showed. Prices of imported automobiles, parts and engines were unchanged and costs for imported consumer goods excluding autos rose 0.3 percent.
Some companies are getting hurt even after attempts to recover costs. Kraft Foods Inc., the world's second-largest foodmaker, last month said its fourth-quarter profit fell, in part because price increases on cheese didn't cover dairy expenses that surged 50 percent from the year-earlier quarter.
Others have gained some success. Tiremakers including Bridgestone Corp., the world's biggest, have boosted prices to counter higher costs of rubber and synthetic alternatives made from petroleum.
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