By Ye Xie and Agnes Lovasz
July 7 (Bloomberg) -- The dollar rose to the highest level against the euro in more than a week as leaders of the Group of Eight nations convened in Japan and a report showed German industrial production unexpectedly fell in May.
The yen weakened against the euro and the dollar as global stocks advanced on retreating oil prices, reviving demand for higher-yielding assets. President George W. Bush, in Japan for the G-8 summit, reiterated support yesterday for a ``strong'' U.S. currency.
``With the G-8 meeting in the background, the near-term sentiment of the dollar is improving,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``They prefer a strong dollar.''
The dollar increased 0.3 percent to $1.5663 per euro at 11:26 a.m. in New York, from $1.5706 on July 4. It touched $1.5611, the strongest level since June 25. The yen dropped 0.7 percent to 107.54 per dollar, from 106.80. Japan's currency fell 0.4 percent to 168.43 versus the euro, from 167.73.
South Korea's won rose against all of its major counterparts after the government pledged ``stern action'' to stabilize the local currency. The won climbed 0.7 percent to 1,042.90 per dollar, from 1,050.35 on July 4.
The dollar strengthened versus the euro on speculation U.S. officials will try to stem gains in oil prices as the G-8 summit gets under way in Japan. Leaders from Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S. are meeting for three days. Central bankers aren't attending the meeting.
Bush on Dollar
Bush said yesterday on the first day of his five-day trip to Japan that the U.S. will continue to pursue a strong dollar.
``The U.S. believes in a strong-dollar policy,'' he said at a news conference with Japanese Prime Minister Yasuo Fukuda in Tokyo. The U.S. economy remains fundamentally strong even as growth has slowed, Bush said.
The dollar fell 0.7 percent against the euro on June 16 after Group of Eight finance ministers stopped short of making a joint comment on currencies, a practice they follow when central bankers are absent.
The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, rose as much as 0.6 percent to 73.151, the highest level since June 24.
The U.S. currency also appreciated as crude oil fell after Iran's Foreign Minister Manouchehr Mottaki expressed confidence in talks with Western governments on the country's nuclear program. Organization of Petroleum Exporting Countries President Chakib Khelil said yesterday record oil prices are more related to the dollar exchange rate than supply.
Crude Oil Falls
Crude oil for August delivery fell 2.4 percent to $141.83 a barrel on the New York Mercantile Exchange. Oil reached a record $145.85 a barrel on July 3.
Federal Reserve Bank of San Francisco President Janet Yellen said today in San Diego that the central bank ``will not allow a wage-price spiral to develop'' and that U.S. economic growth will ``pick up'' next year.
The euro dropped against the dollar as German industrial production unexpectedly dropped 2.4 percent in May, its third straight decline, prompting traders to pare bets the European Central Bank will raise the main refinancing rate for a second time this year.
``We do see the euro weaker,'' said Stuart Bennett, a senior European strategist at Calyon, the investment-banking unit of Credit Agricole SA, France's second-biggest lender. ``We are not relaxed about the growth outlook, and it's weaker than the ECB is accepting. Even though we suspect inflation means that they might have to hike again, the growth dynamics for Europe are pointing toward a weaker euro.''
The euro will fall to a range of $1.43 to $1.45 by the end of the year, Bennett predicted.
Trichet's `No Bias'
The 15-nation currency declined 0.6 percent last week after ECB President Jean-Claude Trichet said he had ``no bias'' on borrowing costs following the decision to raise the main refinancing rate by a quarter-percentage point to 4.25 percent.
The British pound weakened to the lowest level against the dollar in almost two weeks after U.K. factory output fell 0.5 percent in May. The median forecast of analysts surveyed by Bloomberg News was for no change. Sterling slid as much as 0.9 percent to $1.9649 against the dollar, the lowest since June 24, from $1.9823 at the end of last week.
Japan's currency dropped 0.7 percent to 13.91 versus the South African rand and 10.41 against the Mexican peso as a rally in stocks encouraged investors to add to holdings of higher- yielding assets funded in Japan. The Standard & Poor's 500 Index climbed 0.3 percent.
In the carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates. Japan's target lending rate of 0.5 percent is the lowest among major economies and compares with 12 percent in South Africa and 7.75 percent in Mexico.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Agnes Lovasz in London at alovasz@bloomberg.net.
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Monday, July 7, 2008
Gold, Silver Decline as Dollar's Climb Erodes Demand for Metals
By Pham-Duy Nguyen
July 7 (Bloomberg) -- Gold and silver futures fell after the dollar climbed, eroding the appeal of the precious metals as alternative investments.
The dollar rose as much as 0.6 percent against a weighted basket of the euro, yen and four other major currencies. Before today, gold gained 11 percent this year as the dollar index fell 5.2 percent. Gold reached a record $1,033.90 an ounce on March 17.
``Gold came off on the strength of the dollar,'' said Frank McGhee, the head metals trader at Integrated Brokerage Services LLC in Chicago.
Gold futures for August delivery dropped $8.20, or 0.9 percent, to $925.40 an ounce at 9:06 a.m. on the Comex division of the New York Mercantile Exchange.
Silver futures for September delivery declined 26.5 cents, or 1.4 percent, to $18.105 an ounce. Before today, silver rose 23 percent this year.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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July 7 (Bloomberg) -- Gold and silver futures fell after the dollar climbed, eroding the appeal of the precious metals as alternative investments.
The dollar rose as much as 0.6 percent against a weighted basket of the euro, yen and four other major currencies. Before today, gold gained 11 percent this year as the dollar index fell 5.2 percent. Gold reached a record $1,033.90 an ounce on March 17.
``Gold came off on the strength of the dollar,'' said Frank McGhee, the head metals trader at Integrated Brokerage Services LLC in Chicago.
Gold futures for August delivery dropped $8.20, or 0.9 percent, to $925.40 an ounce at 9:06 a.m. on the Comex division of the New York Mercantile Exchange.
Silver futures for September delivery declined 26.5 cents, or 1.4 percent, to $18.105 an ounce. Before today, silver rose 23 percent this year.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Oil Falls $3 as Iran Signals Confidence in Talks, Dollar Gains
By Margot Habiby
Enlarge Image/Details
July 7 (Bloomberg) -- Crude oil fell more than $3 a barrel after Iran's foreign minister expressed confidence in talks with western governments on the country's nuclear program and the dollar gained before a meeting of Group of Eight leaders.
Oil dropped for the first session in four as Foreign Minister Manouchehr Mottaki told CNN yesterday that talks are ``in a new environment'' and ``new approaches'' are possible. The dollar rose to its highest against the euro in more than a week as G-8 leaders are expected to signal support for the currency.
On the Iran situation, ``there's a new package of incentives, and everybody's talking, and that in itself is a positive,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``The dollar is responding to happy talk coming out of the G-8.''
Crude oil for August delivery fell $3.87, or 2.7 percent, to $141.42 a barrel at 10:07 a.m. on the New York Mercantile Exchange.
Oil reached a record $145.85 on July 3 on speculation any attack on Iran may disrupt exports from Iran, OPEC's second- biggest producer.
``Obviously, there's some selling pressure here, some profit taking going on,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``The gasoline and heating oil are pretty weak.''
Heating oil for August delivery fell as much as 4.1 percent today, and gasoline futures were down as much as 3.8 percent.
Holiday Travel
The fewest Americans in three years likely traveled over the July 4th weekend as record gasoline prices and a slowing economy forced consumers to curtail spending, according to AAA, the largest U.S. motoring group. The number of people taking trips of at least 50 miles (80 kilometers) from home over the holiday weekend will fall 1.3 percent to 40.5 million, AAA said.
Regular gasoline at the pump, averaged nationwide, rose 0.1 cent to a record $4.108 a gallon, AAA said today on its Web site.
``The market is looking a little bit softer this morning as oil breaks below its recent trading range and cooler heads prevail for the time being between Iran and the west,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London.
Leaders from Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S. are meeting in Japan for three days. President George W. Bush said at a news conference in Japan yesterday that ``the U.S. believes in a strong-dollar policy.''
The dollar's gains against the euro dim the appeal of commodities used to hedge declines in the U.S. currency. The euro fell to $1.5611 against the dollar, the lowest level since June 25, before trading at $1.5637 as of 10:07 a.m. in New York.
Costlier Commodities
``So many commodities are denominated in dollars,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``Whenever the dollar strengthens, that makes commodities more expensive for everyone else in the world. It makes them less willing to buy oil.''
Brent crude oil for August settlement fell $2.23, or 1.5 percent, to $142.19 a barrel on London's ICE Futures Europe exchange. Futures climbed to a record $146.69 on July 3.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
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Copper Falls Most in Five Weeks as Miners in Peru End Walkout
By Millie Munshi
July 7 (Bloomberg) -- Copper fell the most in five weeks after workers ended a strike in Peru, the world's third-largest source of the metal.
Peruvian miners called off the week-long national strike while talks with government officials over profit-sharing and pensions continue, Deputy Labor Minister Jorge Villasante said yesterday. Copper rose 1.8 percent last week as the strike threatened supplies of the metal used in pipes and wires.
Copper has fallen ``with the end of the miners strike in Peru on Sunday weighing on prices,'' analysts at Barclays Capital said today in a report.
Copper futures for September delivery fell 11.05 cents, or 2.8 percent, to $3.8385 a pound at 9:16 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price fell as much as 3.7 percent, the biggest intraday decline since May 29.
The metal also dropped today as the strengthening dollar eroded demand for commodities as a hedge against inflation. The dollar rose as much as 0.6 percent against a basket of the euro, yen and four other major currencies
On the London Metal Exchange, copper for delivery in three months fell $30.50, or 0.4 percent, to $8,442 a metric ton ($3.83 a pound). The price reached a record $8,940 on July 2.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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July 7 (Bloomberg) -- Copper fell the most in five weeks after workers ended a strike in Peru, the world's third-largest source of the metal.
Peruvian miners called off the week-long national strike while talks with government officials over profit-sharing and pensions continue, Deputy Labor Minister Jorge Villasante said yesterday. Copper rose 1.8 percent last week as the strike threatened supplies of the metal used in pipes and wires.
Copper has fallen ``with the end of the miners strike in Peru on Sunday weighing on prices,'' analysts at Barclays Capital said today in a report.
Copper futures for September delivery fell 11.05 cents, or 2.8 percent, to $3.8385 a pound at 9:16 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price fell as much as 3.7 percent, the biggest intraday decline since May 29.
The metal also dropped today as the strengthening dollar eroded demand for commodities as a hedge against inflation. The dollar rose as much as 0.6 percent against a basket of the euro, yen and four other major currencies
On the London Metal Exchange, copper for delivery in three months fell $30.50, or 0.4 percent, to $8,442 a metric ton ($3.83 a pound). The price reached a record $8,940 on July 2.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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U.S. Stocks Gain as Oil Retreats; General Motors, Yahoo Advance
By Eric Martin
July 7 (Bloomberg) -- U.S. stocks rose for a second day as a $4-a-barrel drop in oil boosted the outlook for profit growth and a five-week retreat left the Standard & Poor's 500 Index at the cheapest relative to earnings since April.
General Motors Corp., the largest U.S. automaker, posted its steepest gain since May after crude slid and the Wall Street Journal said the company is considering cutting jobs and dropping some brands. Yahoo! Inc. rallied the most since February after Microsoft Corp. said it may renew takeover talks if investor Carl Icahn succeeds in replacing Yahoo's board. General Electric Co. advanced after its NBC Universal unit agreed to buy the Weather Channel with two buyout firms.
The S&P 500 added 5.25 points, or 0.4 percent, to 1,268.15 at 10:17 a.m. in New York. The Dow Jones Industrial Average increased 64.24, or 0.6 percent, to 11,352.78. The Nasdaq Composite Index rose 20.48, or 0.9 percent, to 2,265.86. More than three stocks climbed for every two that fell on the New York Stock Exchange.
``If the threat of catastrophes starts to leave the marketplace, people can start once again to look at fundamentals,'' Alan Kral, who helps manage more than $700 million at Trevor Stewart Burton and Jacobsen in New York, said in an interview with Bloomberg Radio. ``We're looking for a growing stability in the marketplace.''
The S&P 500, which last week completed the longest streak of weekly declines in four years, was valued at 20.84 times earnings before the start of trading, the lowest since April 11, according to Bloomberg data. Stocks climbed in Europe and Asia following a rout that left global equities at the cheapest valuations in at least 13 years.
General Motors
General Motors added 49 cents, or 4.8 percent, to $10.61. GM said Hummer is the only one of its eight U.S. brands being formally reviewed for possible sale or shutdown as the automaker's domestic market share falls to an 83-year low. The Wall Street Journal said the automaker may cut white-collar jobs and is considering whether to drop some of its eight brands. GM spokesman Tony Cervone wouldn't comment on possible job cuts.
Crude oil dropped 3.2 percent to $140.62 a barrel in New York after Iran's foreign minister expressed confidence in talks with western governments on the country's nuclear program.
Discussions are ``in a new environment with a new approaching perspective,'' Foreign Minister Manouchehr Mottaki said in an interview with CNN yesterday, adding that ``new approaches'' are possible in Iran's relations with the U.S. Oil reached a record $145.85 on July 3 on speculation any attack on Iran may disrupt exports from OPEC's second-biggest producer.
Yahoo, Microsoft
Yahoo, operator of the most-visited U.S. Web site, jumped $2.26, or 11 percent, to $23.61. Microsoft said it may try to buy the search business or the whole company. Microsoft has been in talks over the past week with Icahn, who controls about 69 million Yahoo shares, or about 5 percent.
General Electric rose 30 cents to $27.21. NBC Universal and buyout firms Bain Capital LLC and Blackstone Group LP agreed to buy the Weather Channel from Landmark Communications Inc., adding a cable network that reaches 96 million households. With the purchase, General Electric's NBC can bolster the company's own NBC Weather Plus channel and Web site.
Broadcom Corp., the maker of chips for Nintendo Co.'s Wii video-game console, rallied $1.39 to $27.61 after the shares were raised to ``buy'' from ``hold'' at Piper Jaffray Cos.
Earnings Season
Alcoa Inc. is scheduled to report second-quarter results tomorrow after the close of U.S. trading, beginning an earnings season that will probably mark the longest streak of consecutive profit declines for S&P 500 companies since 2002. The world's third-largest aluminum producer may say profit dropped 19 percent to 66 cents a share, according to consensus estimates compiled by Bloomberg. Alcoa added 85 cents to $33.63.
Earnings for S&P 500 companies probably shrank for a fourth straight quarter, falling 11.2 percent, according to the average estimate of analysts surveyed by Bloomberg. GE, which in April posted its first quarterly earnings decline in five years, is expected to announce results on July 11. GE may say profit decreased 2.7 percent to less than 54 cents a share, according to analysts' estimates.
Merrill
Merrill Lynch & Co. added 29 cents to $31.41. The third- largest U.S. securities firm may sell part of its stake in New York-based money manager BlackRock Inc. and save more than $1 billion by cutting its dividend, Citigroup Inc. analyst Prashant Bhatia, who has a ``buy'' rating on the stock, wrote in a note to clients. Merrill may also sell its 20 percent passive stake in Bloomberg LP, parent of Bloomberg News, to a blind trust run by Michael Bloomberg, the New York Post reported July 4, citing unidentified people.
APP Pharmaceuticals Inc. jumped $5.71, or 32 percent, to $23.53. Fresenius SE, Europe's biggest maker of intravenous drugs, agreed to buy the company for as much as $4.6 billion to enter the faster-growing U.S. market for generic injectable medicines used in hospitals. Fresenius agreed to pay $23 a share in cash for APP, 29 percent more than APP's closing price on July 3.
Teva Pharmaceutical Industries Ltd. fell $2.93 to $44.27 after test results may make it easier for rivals to sell copies of its top-selling Copaxone medicine.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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July 7 (Bloomberg) -- U.S. stocks rose for a second day as a $4-a-barrel drop in oil boosted the outlook for profit growth and a five-week retreat left the Standard & Poor's 500 Index at the cheapest relative to earnings since April.
General Motors Corp., the largest U.S. automaker, posted its steepest gain since May after crude slid and the Wall Street Journal said the company is considering cutting jobs and dropping some brands. Yahoo! Inc. rallied the most since February after Microsoft Corp. said it may renew takeover talks if investor Carl Icahn succeeds in replacing Yahoo's board. General Electric Co. advanced after its NBC Universal unit agreed to buy the Weather Channel with two buyout firms.
The S&P 500 added 5.25 points, or 0.4 percent, to 1,268.15 at 10:17 a.m. in New York. The Dow Jones Industrial Average increased 64.24, or 0.6 percent, to 11,352.78. The Nasdaq Composite Index rose 20.48, or 0.9 percent, to 2,265.86. More than three stocks climbed for every two that fell on the New York Stock Exchange.
``If the threat of catastrophes starts to leave the marketplace, people can start once again to look at fundamentals,'' Alan Kral, who helps manage more than $700 million at Trevor Stewart Burton and Jacobsen in New York, said in an interview with Bloomberg Radio. ``We're looking for a growing stability in the marketplace.''
The S&P 500, which last week completed the longest streak of weekly declines in four years, was valued at 20.84 times earnings before the start of trading, the lowest since April 11, according to Bloomberg data. Stocks climbed in Europe and Asia following a rout that left global equities at the cheapest valuations in at least 13 years.
General Motors
General Motors added 49 cents, or 4.8 percent, to $10.61. GM said Hummer is the only one of its eight U.S. brands being formally reviewed for possible sale or shutdown as the automaker's domestic market share falls to an 83-year low. The Wall Street Journal said the automaker may cut white-collar jobs and is considering whether to drop some of its eight brands. GM spokesman Tony Cervone wouldn't comment on possible job cuts.
Crude oil dropped 3.2 percent to $140.62 a barrel in New York after Iran's foreign minister expressed confidence in talks with western governments on the country's nuclear program.
Discussions are ``in a new environment with a new approaching perspective,'' Foreign Minister Manouchehr Mottaki said in an interview with CNN yesterday, adding that ``new approaches'' are possible in Iran's relations with the U.S. Oil reached a record $145.85 on July 3 on speculation any attack on Iran may disrupt exports from OPEC's second-biggest producer.
Yahoo, Microsoft
Yahoo, operator of the most-visited U.S. Web site, jumped $2.26, or 11 percent, to $23.61. Microsoft said it may try to buy the search business or the whole company. Microsoft has been in talks over the past week with Icahn, who controls about 69 million Yahoo shares, or about 5 percent.
General Electric rose 30 cents to $27.21. NBC Universal and buyout firms Bain Capital LLC and Blackstone Group LP agreed to buy the Weather Channel from Landmark Communications Inc., adding a cable network that reaches 96 million households. With the purchase, General Electric's NBC can bolster the company's own NBC Weather Plus channel and Web site.
Broadcom Corp., the maker of chips for Nintendo Co.'s Wii video-game console, rallied $1.39 to $27.61 after the shares were raised to ``buy'' from ``hold'' at Piper Jaffray Cos.
Earnings Season
Alcoa Inc. is scheduled to report second-quarter results tomorrow after the close of U.S. trading, beginning an earnings season that will probably mark the longest streak of consecutive profit declines for S&P 500 companies since 2002. The world's third-largest aluminum producer may say profit dropped 19 percent to 66 cents a share, according to consensus estimates compiled by Bloomberg. Alcoa added 85 cents to $33.63.
Earnings for S&P 500 companies probably shrank for a fourth straight quarter, falling 11.2 percent, according to the average estimate of analysts surveyed by Bloomberg. GE, which in April posted its first quarterly earnings decline in five years, is expected to announce results on July 11. GE may say profit decreased 2.7 percent to less than 54 cents a share, according to analysts' estimates.
Merrill
Merrill Lynch & Co. added 29 cents to $31.41. The third- largest U.S. securities firm may sell part of its stake in New York-based money manager BlackRock Inc. and save more than $1 billion by cutting its dividend, Citigroup Inc. analyst Prashant Bhatia, who has a ``buy'' rating on the stock, wrote in a note to clients. Merrill may also sell its 20 percent passive stake in Bloomberg LP, parent of Bloomberg News, to a blind trust run by Michael Bloomberg, the New York Post reported July 4, citing unidentified people.
APP Pharmaceuticals Inc. jumped $5.71, or 32 percent, to $23.53. Fresenius SE, Europe's biggest maker of intravenous drugs, agreed to buy the company for as much as $4.6 billion to enter the faster-growing U.S. market for generic injectable medicines used in hospitals. Fresenius agreed to pay $23 a share in cash for APP, 29 percent more than APP's closing price on July 3.
Teva Pharmaceutical Industries Ltd. fell $2.93 to $44.27 after test results may make it easier for rivals to sell copies of its top-selling Copaxone medicine.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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APP, Cal-Maine Foods, GE, Grey Wolf, Teva: U.S. Equity Preview
By Katherine Greene
July 7 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 8 a.m. in New York unless stated otherwise.
APP Pharmaceuticals Inc. (APPX US) rose 35 percent to $24. Fresenius SE (FMS US), Europe's biggest maker of intravenous drugs, will buy APP for as much as $4.6 billion, or $23 a share, in cash to enter the faster-growing U.S. market for generic injectable medicines used in hospitals.
Cal-Maine Foods Inc. (CALM US) rose 8.7 percent to $35. Earnings at the largest U.S. egg producer and distributor may quadruple in the next year as prices rise, Barron's said, without citing anyone.
General Electric Co. (GE US): Chief Executive Officer Jeff Immelt has until the end of the year to repair his reputation, the New York Post reported, citing three unidentified investors. GE gained 1.5 percent to $26.91 on July 3.
Grey Wolf Inc. (GW US): The natural gas driller's shareholders should reject its plan to buy Basic Energy Services Inc. (BAS US) for about $1.4 billion, RiskMetrics Group Inc.'s ISS Governance Services unit said in a report. Grey Wolf rose 0.7 percent to $9.11 on July 3, while Basic Energy declined 0.4 percent to $30.36.
Marshall & Ilsley Corp. (MI US): Wisconsin's largest bank said it had an unexpected second-quarter loss of as much as $1.60 a share as borrowers failed to repay their debts. Marshall & Ilsley lost 4.2 percent to $14.14 on July 3.
Teva Pharmaceutical Industries Ltd. (TEVA US) fell 6 percent to $44.38. The world's biggest generic-drug maker may face stiffer competition after test results showed Copaxone, its top- selling medicine, didn't work more effectively when given in higher doses to multiple sclerosis patients.
Time Warner Inc. (TWX US) gained 0.7 percent to $14.79. The world's largest media company's shares may gain about 76 percent in the next year as the company benefits from growth in its film, cable-television and print units, Barron's reported, citing a Deutsche Bank AG analyst.
To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net.
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July 7 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 8 a.m. in New York unless stated otherwise.
APP Pharmaceuticals Inc. (APPX US) rose 35 percent to $24. Fresenius SE (FMS US), Europe's biggest maker of intravenous drugs, will buy APP for as much as $4.6 billion, or $23 a share, in cash to enter the faster-growing U.S. market for generic injectable medicines used in hospitals.
Cal-Maine Foods Inc. (CALM US) rose 8.7 percent to $35. Earnings at the largest U.S. egg producer and distributor may quadruple in the next year as prices rise, Barron's said, without citing anyone.
General Electric Co. (GE US): Chief Executive Officer Jeff Immelt has until the end of the year to repair his reputation, the New York Post reported, citing three unidentified investors. GE gained 1.5 percent to $26.91 on July 3.
Grey Wolf Inc. (GW US): The natural gas driller's shareholders should reject its plan to buy Basic Energy Services Inc. (BAS US) for about $1.4 billion, RiskMetrics Group Inc.'s ISS Governance Services unit said in a report. Grey Wolf rose 0.7 percent to $9.11 on July 3, while Basic Energy declined 0.4 percent to $30.36.
Marshall & Ilsley Corp. (MI US): Wisconsin's largest bank said it had an unexpected second-quarter loss of as much as $1.60 a share as borrowers failed to repay their debts. Marshall & Ilsley lost 4.2 percent to $14.14 on July 3.
Teva Pharmaceutical Industries Ltd. (TEVA US) fell 6 percent to $44.38. The world's biggest generic-drug maker may face stiffer competition after test results showed Copaxone, its top- selling medicine, didn't work more effectively when given in higher doses to multiple sclerosis patients.
Time Warner Inc. (TWX US) gained 0.7 percent to $14.79. The world's largest media company's shares may gain about 76 percent in the next year as the company benefits from growth in its film, cable-television and print units, Barron's reported, citing a Deutsche Bank AG analyst.
To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net.
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Forex Technical Analytics
Daily Forex Technicals | Written by FOREX Ltd | Jul 07 08 12:02 GMT |
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CHF
The pre-planned breakout variant for buyers has been realized but without attainment of assumed targets. OsMA trend indicator having marked the active stage of bullish development supports the preservation of opened buyers’ positions but taking into account a feature of overbought factor, we assume a risk of short-term pair return to support range 1.0260/80, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers’ positions on condition of formation of topping signals the targets will be 1.0320/40 and/or further breakout variant up to 1.0380/1.0400, 1.0420/40. An alternative for sells will be below 1.0200 with the targets 1.0120/40, 1.0080/1.0100.
GBP
The pre-planned breakout variant for sells has been realized but without attainment of minimal assumed targets. OsMA trend indicator having marked the preservation of bearish advantage continues to support the priority of trading planning for today and the active stage of bearish development gives grounds to preserve earlier opened short positions. Nevertheless taking into account the features of oversold factor, we assume the risks of rate correction for which the key resistance range will be 1.9800/20, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.9730/50, 1.9690/1.9710 and/or further breakout variant up to 1.9620/40, 1.9580/1.9600. An alternative for buyers will be above 1.9860 with 1.9900/20, 1.9940/60.
JPY
The pre-planned breakout variant for buyers has been realized with support of active stage of bullish development according to OsMA indicator. At present taking into account some features of overbought factor there are the risks of rate correction for which the key boundary levels will be 106.80/90, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers’ positions on condition of formation of topping signals the targets will be 107.20/30, 107.70/80 and/or further breakout variant up to 108.20/40, 108.60/80. An alternative for sells will be below 106.40 with the targets 105.80/106.00, 105.20/40.
EUR
The pre-planned breakout variant for sells has been realized but with a loss of several points in attainment of minimal assumed target. OsMA trend indicator having marked the activity fall of both parties preserves the priority of bearish planning for today. Hence we assume a possibility of pair return to resistance range 1.5670/90, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.5610/30, 1.5560/80 and/or further breakout variant up to 1.5500/20, 1.5460/80, 1.5400/20. An alternative for buyers will be above 1.5740 with the targets 1.5780/1.5800, 1.5820/40.
FOREX Ltd
www.forexltd.co.uk
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InBev attempts to oust Anheuser-Busch board
By Steve Goldstein, MarketWatch
Last update: 4:20 a.m. EDT July 7, 2008
LONDON (MarketWatch) - Belgian brewer InBev on Monday announced its latest move in its quest to buy Anheuser-Busch, putting up an alternative slate of directors that includes a descendant of the founding Busch family.
InBev said its alternative board includes Adolphus Busch IV, the great-grandson of the Anheuser-Busch founder and the uncle of the current Anheuser-Busch chief executive, August Busch IV.
Other proposed board members include Ronald Dollens, the former CEO of Guidant; James Healey, ex-chief financial officer of Nabisco; former Pfizer Chairman and CEO Henry McKinnell; and Paul Meister, the CEO and co-founder of investment firm Liberty Lane Partners.
InBev said it will make the filing to the Securities and Exchange Commission later on Monday.
InBev in early June launched a bid to buy Anheuser-Busch for $65 a share, or roughly $46 billion.
Anheuser-Busch rejected InBev's offer, calling it "financially inadequate," and proposed a rival cost-cutting and price-increase plan.
InBev on Monday maintained that it wants a "friendly" combination with the St. Louis brewer.
"Our strong preference remains to enter into a constructive dialogue with Anheuser-Busch to achieve a friendly combination that comprehensively addresses the interests of all constituents. We believe our firm offer of $65 per share reflects the full and fair value of Anheuser-Busch and is a compelling proposal for shareholders," said CEO Carlos Brito in a statement.
"In comparison, the Anheuser-Busch newly formulated plan entails significant execution risks and does little to address the fundamental competitive challenges the company faces in an increasingly global industry, wherein a competitive brand portfolio, a worldwide distribution network and economies of scale are key drivers of success."
InBev had previously filed suit in Delaware to confirm that Anheuser-Busch shareholders have the ability to remove all 13 members of their board without cause.
InBev said it's clear that shareholders have the ability to remove at least those who were elected after 2006, but it wants to clarify that the five members elected in 2006 can also be removed.
Shares of Anheuser-Busch ended Thursday at $61.67.
In early Belgium trade, InBev shares advanced 1.4%. End of Story
Steve Goldstein is MarketWatch's London bureau chief.
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Last update: 4:20 a.m. EDT July 7, 2008
LONDON (MarketWatch) - Belgian brewer InBev on Monday announced its latest move in its quest to buy Anheuser-Busch, putting up an alternative slate of directors that includes a descendant of the founding Busch family.
InBev said its alternative board includes Adolphus Busch IV, the great-grandson of the Anheuser-Busch founder and the uncle of the current Anheuser-Busch chief executive, August Busch IV.
Other proposed board members include Ronald Dollens, the former CEO of Guidant; James Healey, ex-chief financial officer of Nabisco; former Pfizer Chairman and CEO Henry McKinnell; and Paul Meister, the CEO and co-founder of investment firm Liberty Lane Partners.
InBev said it will make the filing to the Securities and Exchange Commission later on Monday.
InBev in early June launched a bid to buy Anheuser-Busch for $65 a share, or roughly $46 billion.
Anheuser-Busch rejected InBev's offer, calling it "financially inadequate," and proposed a rival cost-cutting and price-increase plan.
InBev on Monday maintained that it wants a "friendly" combination with the St. Louis brewer.
"Our strong preference remains to enter into a constructive dialogue with Anheuser-Busch to achieve a friendly combination that comprehensively addresses the interests of all constituents. We believe our firm offer of $65 per share reflects the full and fair value of Anheuser-Busch and is a compelling proposal for shareholders," said CEO Carlos Brito in a statement.
"In comparison, the Anheuser-Busch newly formulated plan entails significant execution risks and does little to address the fundamental competitive challenges the company faces in an increasingly global industry, wherein a competitive brand portfolio, a worldwide distribution network and economies of scale are key drivers of success."
InBev had previously filed suit in Delaware to confirm that Anheuser-Busch shareholders have the ability to remove all 13 members of their board without cause.
InBev said it's clear that shareholders have the ability to remove at least those who were elected after 2006, but it wants to clarify that the five members elected in 2006 can also be removed.
Shares of Anheuser-Busch ended Thursday at $61.67.
In early Belgium trade, InBev shares advanced 1.4%. End of Story
Steve Goldstein is MarketWatch's London bureau chief.
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Oil slips to near $143, eyes dollar, Iran
07.07.08, 4:32 AM ET
United States - * Oil trades near $143 a barrel, up almost 50 percent this year * Dollar at one-week high against basket of major currencies * Iran vows to pursue its uranium enrichment programme (Previous PERTH, updates prices)
LONDON, July 7 (Reuters) - Oil eased to near $143 a barrel on Monday as the dollar strengthened, but losses were limited by concern over oil producer Iran's dispute with the West over its nuclear programme.
Iran on Saturday vowed to pursue its enrichment programme, saying it had no intention of discussing its "right to enriching uranium," keeping alive political tensions in the Middle East and adding to supply worries.
"Geopolitical concerns are still supporting oil prices," said Toby Hassall, analyst at Commodity Warrants Australia in Sydney.
"Apart from Iran, oil prices will also be dependent on the U.S. dollar movements and the U.S. equity markets this week."
U.S. crude traded at $143.35 a barrel by 0826 GMT, down from dealing late on Friday. Brent crude fell 37 cents to $144.05.
The New York Mercantile Exchange did not issue an official Friday closing price due to the July 4 holiday.
On Monday, the dollar edged up to a one-week high against a basket of major currencies, benefitting from a European Central Bank tone that has reduced expectations of further interest rate rises.
Strength in the U.S. dollar can reduce the appeal of oil and other commodities to investors as a hedge against inflation.
Oil hit a record $145.85 on Thursday, but eased fell as traders anticipated easing tensions between Iran and the West after Tehran responded to a package of incentives to try to resolve the dispute.
The market has gained almost 50 percent this year, driven partly by tension over Iran's nuclear programme and expectations that global oil supply will fail to keep pace with demand growth from China and India. (Additional reporting by Fayen Wong; editing by William Hardy)
Copyright 2008 Reuters, Click for Restriction
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United States - * Oil trades near $143 a barrel, up almost 50 percent this year * Dollar at one-week high against basket of major currencies * Iran vows to pursue its uranium enrichment programme (Previous PERTH, updates prices)
LONDON, July 7 (Reuters) - Oil eased to near $143 a barrel on Monday as the dollar strengthened, but losses were limited by concern over oil producer Iran's dispute with the West over its nuclear programme.
Iran on Saturday vowed to pursue its enrichment programme, saying it had no intention of discussing its "right to enriching uranium," keeping alive political tensions in the Middle East and adding to supply worries.
"Geopolitical concerns are still supporting oil prices," said Toby Hassall, analyst at Commodity Warrants Australia in Sydney.
"Apart from Iran, oil prices will also be dependent on the U.S. dollar movements and the U.S. equity markets this week."
U.S. crude traded at $143.35 a barrel by 0826 GMT, down from dealing late on Friday. Brent crude fell 37 cents to $144.05.
The New York Mercantile Exchange did not issue an official Friday closing price due to the July 4 holiday.
On Monday, the dollar edged up to a one-week high against a basket of major currencies, benefitting from a European Central Bank tone that has reduced expectations of further interest rate rises.
Strength in the U.S. dollar can reduce the appeal of oil and other commodities to investors as a hedge against inflation.
Oil hit a record $145.85 on Thursday, but eased fell as traders anticipated easing tensions between Iran and the West after Tehran responded to a package of incentives to try to resolve the dispute.
The market has gained almost 50 percent this year, driven partly by tension over Iran's nuclear programme and expectations that global oil supply will fail to keep pace with demand growth from China and India. (Additional reporting by Fayen Wong; editing by William Hardy)
Copyright 2008 Reuters, Click for Restriction
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Total Indonesia to Spend $1.9 Billion in 2009
By Reuters | 07 Jul 2008 | 03:48 AM ET
The Indonesian unit of French oil major Total plans to invest $1.9 billion in the Southeast nation's oil and gas sector, the head of the firm said on Monday.
Indonesia, Asia Pacific's only OPEC member, has stepped up efforts to lure more foreign investment into the energy sector in a bid to increase the country's dwindling output.
"The capital expenditure for 2008 is $1.9 billion, we will spend about the same in 2009," the head of Total E&P Indonesia, Philippe Armand, told reporters after meeting Vice President Jusuf Kalla.
The 2008 capital expenditure figure is higher than an earlier estimate of $1.5 billion.
Total said last year it had made two new gas discoveries in the southern part of the offshore Mahakam block, about 45 km (28 miles) from Balikpapan in Indonesia's East Kalimantan province. It expects the field to start producing in 2012.
Total supplies approximately 80 percent of the feed gas for the Bontang liquefaction plant in Indonesia, the world's biggest LNG facility.
The gas supplied to Bontang comes from the Mahakam block along with the Tambora, Tunu and Peciko gas fields. Japan's Inpex Holdings also holds a 50 percent share in the block.
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The Indonesian unit of French oil major Total plans to invest $1.9 billion in the Southeast nation's oil and gas sector, the head of the firm said on Monday.
Indonesia, Asia Pacific's only OPEC member, has stepped up efforts to lure more foreign investment into the energy sector in a bid to increase the country's dwindling output.
"The capital expenditure for 2008 is $1.9 billion, we will spend about the same in 2009," the head of Total E&P Indonesia, Philippe Armand, told reporters after meeting Vice President Jusuf Kalla.
The 2008 capital expenditure figure is higher than an earlier estimate of $1.5 billion.
Total said last year it had made two new gas discoveries in the southern part of the offshore Mahakam block, about 45 km (28 miles) from Balikpapan in Indonesia's East Kalimantan province. It expects the field to start producing in 2012.
Total supplies approximately 80 percent of the feed gas for the Bontang liquefaction plant in Indonesia, the world's biggest LNG facility.
The gas supplied to Bontang comes from the Mahakam block along with the Tambora, Tunu and Peciko gas fields. Japan's Inpex Holdings also holds a 50 percent share in the block.
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Daily Report: Dollar Recovers Further in Quiet Start of the Week
Market Overview | Written by ActionForex.com | Jul 07 08 06:39 GMT | Dollar recovers further in a rather quiet Asian session as the week opens. Some interests will be on industrial production data from Germany and UK to be released in the European session today. Both industrial and manufacturing production in UK recovered modestly in April but are expected to give back some of the gains in May by falling -0.1% mom and -0.2% mom respectively. Moreover, both are expected to show first negative annualized growth of -0.8% and -0.1% yoy respectively. Though, reactions to the data could be mild as long as dollar's broad based recovery continues.
Germany's industrial production is expected to recover mildly by showing 0.4% mom growth but with yoy rate slowed from 4.8% to 3.2%. Euro continues to be relatively soft since Trichet's dovish comments last week and could remains so in case the data show further weakness in the German economy.
The three days G8 meeting starts today in Japan and is expected to focus on energy and good inflations. it's to be seen whether currency rates will be a topic. Just released in European session, Swiss unemployment rated dropped from 2.4% to 2.3% in Jun as expected. Canadian building permits is expected to fall -5.8% in May. No US data will be scheduled today and focus will be on Fed Yellen's speech on US Economic Outlook.
USD/CHF Daily Outlook
Daily Pivots: (S1) 1.0228; (P) 1.0253; (R1) 1.0274; More
USD/CHF's rebound extends further to as high as 1.0318 today and at this point, intraday bias remains mildly on the upside as long as 1.0231 minor support holds. Further rebound could still be seen. Nevertheless, upside should be limited below 61.8% of 1.0539 to 1.0111 at 1.0376 and bring another fall. As discussed before, prior break of short term rising trend line support with daily MACD staying in negative region argues that medium term rebound from 0.9634 is already completed at 1.0623. Sustained break of 1.0147 support will add more credence to this case and bring deeper fall to 0.9995 support. Also, note that short term risk remains on the downside as long as 1.0539 resistance holds even in case of a stronger than expected rebound.
In the bigger picture, a medium term bottom is in place at 0.9634. Subsequent rally from there is still treated as correction to whole medium term down trend only. Break of 1.0147 support will be another signal that such correction has completed. Further break of 0.9995 support will confirm this case and turn short term outlook bearish for 0.9634 low. However, strong rebound from 0.9995/1.0147 support zone will argue that rebound from 0.9634 is not completed yet and will put focus back to 1.0623 resistance.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 05:45 | CHF | Swiss Unemployment rate Jun | 2.30% | 2.30% | 2.40% | |
| 08:30 | GBP | U.K. Industrial prod'n M/M May | -0.10% | 0.20% | ||
| 08:30 | GBP | U.K. Industrial prod'n Y/Y May | -0.80% | 0.20% | ||
| 08:30 | GBP | U.K. Manufacturing prod'n M/M May | -0.10% | 0.10% | ||
| 08:30 | GBP | U.K. Manufacturing prod'n Y/Y May | -0.20% | 0.10% | ||
| GBP | U.K. Halifax hse prices 3m Y/Y | -5.90% | -3.80% | |||
| 10:00 | EUR | Germany Industrial prod'n M/M May | 0.40% | -0.80% | ||
| 10:00 | EUR | Germany Industrial prod'n Y/Y May | 3.20% | 4.80% | ||
| 1230 | CAD | Canada Building permits May | -5.80% | 14.50% | ||
| 14:30 | CAD | BOC Business Outlook Survey | ||||
| 15:00 | USD | Fed's Yellen speaks |
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Today's Key Points
Daily Forex Fundamentals | Written by Danske Bank | Jul 07 08 07:35 GMT |
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- Markets start sleepy after 4 July weekend - EUR/USD is trending slightly downwards
- Nikkei ends worst decline since 1954 by rising close to 1%
- No big market movers today - only tier 2 data and a speech from Fed's Yellen
Markets Overnight
Friday was unusually quiet as the US markets were closed for Independence Day and Europe took a breather after an extremely hectic Thursday with rate decisions, speeches and important data releases.
In FX markets, EUR/USD has drifted slightly lower overnight without any specific drivers. The pair now trades around 1.5650, the lowest since 26 June and the average over the past two weeks. As the dollar has appreciated versus the euro, so has sterling. EUR/GBP has fallen slightly overnight and is trading just around the 0.7910-mark. Largest mover in the G10 last week, the SEK, is unchanged versus euro overnight with EUR/SEK at 9.38. Despite huge market activity in the past week, the FX market has been relatively stable and most pairs are somewhat unchanged compared to one week ago.
Asian equities have started the week on a positive note. After a 12-day decline of 8.4%, the longest since 1954, Nikkei225 is up 1% at the time of writing. Hang Seng has gained 1.5%.
According to AAA, the largest U.S. motoring group, the fewest Americans in three years likely travelled over the 4 July weekend as record gasoline prices and a slowing economy force consumers to curtail spending. Trips of at least 50 miles fell 1.3% to 40.5 million.
Oil prices have fallen slightly overnight. Crude for August delivery has dropped from $146.85 per barrel to now just below $144 per barrel. Supply risks persist with the continuation of Iran's nuclear program heightening concerns of a military conflict, ongoing problems in Nigeria and uncertainty on the united stance of OPEC. Chinese business climate index for 2nd quarter rose from 136.2 to 137.4.
Global Daily
After last week's super-Thursday the markets should be able to continue to recuperate today as the agenda for economic data is very meagre. In many countries around Europe we will see industrial production data today, but this will hardly prove much of a market mover for any market. In the US there are no scheduled data releases, but there is a speech on the programme by FOMC member Yellen, on the US economic outlook.
The G8 meeting begins today in Osaka. The heads of state of the G8 nations (Canada, France, Germany, Italy, Japan, Russia, UK and the US) plus the EU as well as the heads of state of Brazil, China, India, Mexico, South Africa and many more are gathered for a three-day event. Together, these nations represent one third of global energy supply and two thirds of global energy consumption. They have, in other words, significant market power if unifying. Despite that, we believe that they will stick to imploring OPEC to increase production rather than to address their own problems with surging oil prices. Coordinated intervention in FX markets will probably be too techy for heads of state, so this issue will be left for the finance ministers, who meet in September
Scandi Daily
In Sweden we receive the budget outcome. We have no numerical target, but suspect that the better than expected results over the last few months may persist. However, given the large volatility on financial markets this second-rate variable will probably not have any major impact on neither rates, nor currency.
Danske Bank
http://www.danskebank.com/danskeresearch
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Today's Market Outlook
Daily Forex Technicals | Written by Windsor Brokers Ltd | Jul 07 08 07:31 GMT |
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EURUSD
09:00 (GMT+3) Breaks out of minor consolidation after last Thursday's losses off 1.5910 high to move under 1.5678, 38.2% of 1.5303/1.5910 upleg region. Subsequent breach of former swing top at 1.5652, 20 June hints deeper pullback to retrace 1.5303, 13 June upleg towards 1.5537, 25 June, near 61.8% retrace while extending short-term ranging mode.
Res: 1.5728, 1.5752, 1.5778, 1.5827
Sup: 1.5628, 1.5616, 1.5600, 1.5578
USDJPY
09:00 (GMT+3) Breaks out of past 2-day bull coil to push above falling 10-day MA while highlighting a 5-day rising wedge drawn off 104.99 low, 30 June. Headway above 107.22, 27 June high, 61.8% of 108.59/104.99 downleg hints recent pent-up bull with scope for possible return move towards the 108.59/62 congestive tops. A reversal under 106.60 however weakens.
Res: 107.66, 107.85, 108.19, 108.42
Sup: 106.88, 106.58, 106.47, 106.20
GBPUSD
09:00 (GMT+3) Failed to find support from 1.9792, 20 June former pivot high as losses from 2.0008, 01 July high extends towards 1.9770/47, 25 June high/61.8% retrace of 1.9585/2.0008 upleg. A minimum swing above last Friday's 1.9849 high is needed reopen 1.9881/88 ahead of 1.9915/40 to reaffirm uptrend resumption. Until then, the pair shall respond to weakening daily technicals and head south.
Res: 1.9800, 1.9835, 1.9849, 1.9888
Sup: 1.9747, 1.9715, 1.9709, 1.9689
USDCHF
09:00 (GMT+3) Has firmed off last Thursday's bull engulfing day which took out 1.0270 lower top, 27 June. This favors further retrace of 1.0494 downleg, 23 June and the larger 3-legged swings from 1.0541, 13 June towards initial 1.0304, 20 June low and 1.0326/33, 50% of 1.0541/1.0112 fall region. A swing low is now sought towards 1.0200/1.0190 via a potential bull flag on the hourly chart.
Res: 1.0333, 1.0349, 1.0377, 1.0391
Sup: 1.0232, 1.0196, 1.0175, 1.0149
Windsor Brokers Ltd
http://www.windsorbrokers.biz
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Liechtenstein Man in UBS Case Had Clients in Libya, U.K. Probes
By Ryan J. Donmoyer and David Voreacos
July 7 (Bloomberg) -- Mario Staggl, a Liechtenstein investment adviser indicted in a tax-evasion probe of UBS AG, has for years helped scandal-tainted clients manage money stashed around the world.
Staggl told German prosecutors he set up companies for a consultant in South Africa who later pleaded guilty to trying to help Libya obtain nuclear bomb-making equipment, and provided similar services to an engineer being tried in Germany on related charges. He helped manage offshore assets for the family of a London politician accused by U.K. authorities of hiding money to avoid $80 million in penalties, U.S. records show.
``He appears to help people move money and conceal the ownership, source or location of it,'' said Gregory Baldwin, a former Miami federal prosecutor, after reviewing Staggl's record.
U.S. federal prosecutors in May charged that Staggl and former UBS banker Bradley Birkenfeld helped California billionaire Igor Olenicoff and other clients evade taxes. Olenicoff pleaded guilty to filing a false tax return. Birkenfeld pleaded guilty last month, saying UBS helped U.S. customers hide $20 billion.
After Staggl missed a May court appearance in Fort Lauderdale, Florida, U.S. authorities declared him a fugitive. Staggl, 43, didn't respond to calls, e-mails, and a visit to his two-story home or office in the shadow of the Alps. He continues to work openly at the red-brick headquarters of New Haven Trust Co. in Schaan, Liechtenstein, a 62-square-mile principality famous for bank secrecy.
Smoke, No Fire
``Usually where there's smoke, there's fire,'' said Staggl's lawyer, Andreas Schurti. ``Not here. We have a lot of smoke but no fire.''
In a 2005 interview with German prosecutors in a Liechtenstein court, Staggl said he had 150 to 200 clients and held executive positions in 200 companies established for customers in tax havens such as Liechtenstein and the British Virgin Islands.
German authorities were questioning Staggl about his connections with two men who were later accused of trying to arrange shipments of uranium-enrichment equipment to Libya. Both were allegedly part of a black market in atom-bomb technology headed by scientist Abdul Qadeer Khan, the so-called father of Pakistan's nuclear bomb.
One Staggl client, Gotthard Lerch, is fighting charges in a German court for alleged arms and export violations. Staggl told the Germans he managed seven offshore companies for Lerch, according to a court summary of the interview. Swiss corporation records listed Staggl as a director of Lerch's consulting firm.
Uranium Enrichment
Staggl said he also managed assets for Gerhard Wisser, a friend of Lerch's who pleaded guilty last year in South Africa to helping Khan's network procure equipment needed to make weapons-grade uranium.
Wisser was considering a divorce and ``wanted to protect himself from an asset point of view,'' Staggl told German prosecutors. Wisser was given an 18-year jail sentence, suspended on the condition that he cooperates with investigators, and forfeited $5 million of alleged criminal gains.
Staggl also helped manage a British Virgin Islands company that held assets for the family of Dame Shirley Porter, daughter of Tesco Plc supermarket founder Jack Cohen, according to U.S. Securities and Exchange Commission filings.
Labour Renters Replaced
Porter, now 77, was accused of trying to strengthen the Conservative Party's electoral fortunes in the 1980s by selling more than 600 public housing units, replacing Labour Party- leaning renters with Tory-friendly homeowners. At the time, she headed the city council in Westminster, a section of London that includes Westminster Abbey and Buckingham Palace.
Porter, who said the council's actions were within its authority, was ordered to repay Westminster's losses from the ``homes for votes'' incident. With interest, Porter's payment grew by 2004 to 44 million pounds, or $80 million under exchange rates at the time.
After Britain's House of Lords in December 2001 upheld the penalties, Porter said she had only 300,000 pounds and couldn't pay.
British authorities searched for assets and found that she had ``transferred the majority of her remaining assets to her husband and/or offshore trusts by the late 1990s,'' according to a 2007 government auditor's report.
Zollikon Investments
Staggl was a director at Zollikon Investments SA, in Tortola, British Virgin Islands, which held Porter family assets during the British proceedings, according to SEC filings. Zollikon controlled notes issued to Porter's husband in connection with a $12 million loan to Telos Corp., an Ashburn, Virginia-based defense contractor. Porter's son, John Porter, bought a controlling interest in Telos in 1993 with money provided by his parents, filings show.
Zollikon received quarterly interest payments from Telos on the notes, and Staggl signed papers for a refinancing of Telos debt that transferred $1 million to Zollikon. U.K. Land Registry records show Zollikon also paid $2.7 million for Shirley Porter's London flat.
In April 2004, Porter settled the Westminster dispute for about $22 million.
``Everybody knew she wasn't telling the truth -- now we know how she hid the money, and the sort of people she used to help her,'' said Paul Dimoldenberg, a Labour Party member of the Westminster council.
Porter didn't respond to calls, a letter and visits to her London apartment. John Porter said in an e-mail that he had never ``met or dealt with Mr. Staggl in any way.''
To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.netDavid Voreacos in Newark, New Jersey at dvoreacos@bloomberg.net
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July 7 (Bloomberg) -- Mario Staggl, a Liechtenstein investment adviser indicted in a tax-evasion probe of UBS AG, has for years helped scandal-tainted clients manage money stashed around the world.
Staggl told German prosecutors he set up companies for a consultant in South Africa who later pleaded guilty to trying to help Libya obtain nuclear bomb-making equipment, and provided similar services to an engineer being tried in Germany on related charges. He helped manage offshore assets for the family of a London politician accused by U.K. authorities of hiding money to avoid $80 million in penalties, U.S. records show.
``He appears to help people move money and conceal the ownership, source or location of it,'' said Gregory Baldwin, a former Miami federal prosecutor, after reviewing Staggl's record.
U.S. federal prosecutors in May charged that Staggl and former UBS banker Bradley Birkenfeld helped California billionaire Igor Olenicoff and other clients evade taxes. Olenicoff pleaded guilty to filing a false tax return. Birkenfeld pleaded guilty last month, saying UBS helped U.S. customers hide $20 billion.
After Staggl missed a May court appearance in Fort Lauderdale, Florida, U.S. authorities declared him a fugitive. Staggl, 43, didn't respond to calls, e-mails, and a visit to his two-story home or office in the shadow of the Alps. He continues to work openly at the red-brick headquarters of New Haven Trust Co. in Schaan, Liechtenstein, a 62-square-mile principality famous for bank secrecy.
Smoke, No Fire
``Usually where there's smoke, there's fire,'' said Staggl's lawyer, Andreas Schurti. ``Not here. We have a lot of smoke but no fire.''
In a 2005 interview with German prosecutors in a Liechtenstein court, Staggl said he had 150 to 200 clients and held executive positions in 200 companies established for customers in tax havens such as Liechtenstein and the British Virgin Islands.
German authorities were questioning Staggl about his connections with two men who were later accused of trying to arrange shipments of uranium-enrichment equipment to Libya. Both were allegedly part of a black market in atom-bomb technology headed by scientist Abdul Qadeer Khan, the so-called father of Pakistan's nuclear bomb.
One Staggl client, Gotthard Lerch, is fighting charges in a German court for alleged arms and export violations. Staggl told the Germans he managed seven offshore companies for Lerch, according to a court summary of the interview. Swiss corporation records listed Staggl as a director of Lerch's consulting firm.
Uranium Enrichment
Staggl said he also managed assets for Gerhard Wisser, a friend of Lerch's who pleaded guilty last year in South Africa to helping Khan's network procure equipment needed to make weapons-grade uranium.
Wisser was considering a divorce and ``wanted to protect himself from an asset point of view,'' Staggl told German prosecutors. Wisser was given an 18-year jail sentence, suspended on the condition that he cooperates with investigators, and forfeited $5 million of alleged criminal gains.
Staggl also helped manage a British Virgin Islands company that held assets for the family of Dame Shirley Porter, daughter of Tesco Plc supermarket founder Jack Cohen, according to U.S. Securities and Exchange Commission filings.
Labour Renters Replaced
Porter, now 77, was accused of trying to strengthen the Conservative Party's electoral fortunes in the 1980s by selling more than 600 public housing units, replacing Labour Party- leaning renters with Tory-friendly homeowners. At the time, she headed the city council in Westminster, a section of London that includes Westminster Abbey and Buckingham Palace.
Porter, who said the council's actions were within its authority, was ordered to repay Westminster's losses from the ``homes for votes'' incident. With interest, Porter's payment grew by 2004 to 44 million pounds, or $80 million under exchange rates at the time.
After Britain's House of Lords in December 2001 upheld the penalties, Porter said she had only 300,000 pounds and couldn't pay.
British authorities searched for assets and found that she had ``transferred the majority of her remaining assets to her husband and/or offshore trusts by the late 1990s,'' according to a 2007 government auditor's report.
Zollikon Investments
Staggl was a director at Zollikon Investments SA, in Tortola, British Virgin Islands, which held Porter family assets during the British proceedings, according to SEC filings. Zollikon controlled notes issued to Porter's husband in connection with a $12 million loan to Telos Corp., an Ashburn, Virginia-based defense contractor. Porter's son, John Porter, bought a controlling interest in Telos in 1993 with money provided by his parents, filings show.
Zollikon received quarterly interest payments from Telos on the notes, and Staggl signed papers for a refinancing of Telos debt that transferred $1 million to Zollikon. U.K. Land Registry records show Zollikon also paid $2.7 million for Shirley Porter's London flat.
In April 2004, Porter settled the Westminster dispute for about $22 million.
``Everybody knew she wasn't telling the truth -- now we know how she hid the money, and the sort of people she used to help her,'' said Paul Dimoldenberg, a Labour Party member of the Westminster council.
Porter didn't respond to calls, a letter and visits to her London apartment. John Porter said in an e-mail that he had never ``met or dealt with Mr. Staggl in any way.''
To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.netDavid Voreacos in Newark, New Jersey at dvoreacos@bloomberg.net
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China Drafts New Trade Regulation to Curb `Hot Money'
By Belinda Cao and Aaron Pan
July 7 (Bloomberg) -- China is drafting regulations to control cross-border payments for services to curb rising inflows of ``hot money'' betting on gains in the yuan, according to an official at the nation's currency regulator.
Controls on international payments for consultancy or franchising fees are ``relatively weak'' and need to be strengthened to stop speculative capital inflows, said the official at the State Administration of Foreign Exchange, who declined to be named. The regulator is consulting with agencies including the commerce ministry on details before announcing the new rules, he said.
``This shows China is serious and well aware of these flows that are coming in,'' said Patrick Bennett, a currency strategist with Societe Generale SA in Hong Kong. ``They want a better and more regulated system and I expect it to be successful.''
The yuan has risen 21 percent since China scrapped a decade-long link to the dollar three years ago as increased exports drove the trade surplus to a record and overseas investors bought Chinese stocks and property. The inflows of cash helped stoked inflation, which reached 8.1 percent in the first five months, compared with a rate of 4.8 percent last year.
China's currency was little changed at 6.8565 versus the U.S. dollar as of 11:12 a.m. in Shanghai, from 6.8589 at the end of last week, according to the China Foreign Exchange Trade System.
`More Difficult'
Foreign-currency income from the services trade, which includes transport, tourism, insurance and marketing, rose 33 percent in 2007 to $122.2 billion, outpacing the 26 percent increase in the value of exported goods to $1.2 trillion, a June 5 report showed.
``It is more difficult to monitor trade of services than that of goods,'' said Mei Xinyu, a researcher at the Ministry of Commerce in Beijing, ``We still lack good methods to check if prices in cross-border services are fair or not.''
The regulator tightened controls on exchange of goods July 2, asking exporters to register foreign-currency income on a central database shared by regulators and banks. It also announced rules for tracking companies' prepayment receipts from overseas buyers and deferred payments for imports.
The measures were to ``prevent borrowing risks and potential large-scale capital outflows in the future,'' the regulator said in its online statement.
``Trade will become a major exit channel for speculative capital, should a flight happen,'' Mei at the commerce ministry said.
No rules can completely block speculative capital, said Li Youhuan, a researcher at the Chinese Academy of Social Sciences, Guangdong Branch.
To contact the reporters on this story: Belinda Cao in Beijing at lcao4@bloomberg.net; Aaron Pan in Hong Kong at apan8@bloomberg.net.
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Gold May Rise for 4th Week on Demand for Hedge From Inflation
By Claudia Carpenter
July 7 (Bloomberg) -- Gold may rise for a fourth consecutive week, the longest advance since January, on speculation rising commodity prices will accelerate demand for the precious metal as a hedge against inflation.
Twenty-six of 42 traders, investors and analysts surveyed from Tokyo to Seattle on July 2 to July 4 advised buying gold, which rose 0.5 percent last week to $935.50 an ounce in New York. Eleven said sell and five were neutral.
Rising energy, food and other commodity prices are pushing up inflation around the world. In India, the world's biggest gold buyer, inflation in June was the highest in 13 years. Gold futures have climbed 12 percent this year.
A majority of analysts surveyed on June 26 and June 27 anticipated gold's gain last week. The survey has forecast prices accurately in 133 of 217 weeks, or 61 percent of the time.
This week's survey results: Bullish: 26 Bearish: 11 Neutral: 5
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
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July 7 (Bloomberg) -- Gold may rise for a fourth consecutive week, the longest advance since January, on speculation rising commodity prices will accelerate demand for the precious metal as a hedge against inflation.
Twenty-six of 42 traders, investors and analysts surveyed from Tokyo to Seattle on July 2 to July 4 advised buying gold, which rose 0.5 percent last week to $935.50 an ounce in New York. Eleven said sell and five were neutral.
Rising energy, food and other commodity prices are pushing up inflation around the world. In India, the world's biggest gold buyer, inflation in June was the highest in 13 years. Gold futures have climbed 12 percent this year.
A majority of analysts surveyed on June 26 and June 27 anticipated gold's gain last week. The survey has forecast prices accurately in 133 of 217 weeks, or 61 percent of the time.
This week's survey results: Bullish: 26 Bearish: 11 Neutral: 5
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
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Deutsche, UBS Fight History Forecasting Best S&P 500 Since 1982
By Eric Martin and Michael Tsang
July 7 (Bloomberg) -- Deutsche Bank AG, Lehman Brothers Holdings Inc. and UBS AG say the Standard & Poor's 500 Index will gain the most in 26 years during this year's second half. That isn't going to happen, if history is any guide.
The S&P 500 will rise 18 percent by January, according to the consensus projection of 10 U.S. strategists surveyed by Bloomberg. The forecasts are based partly on estimates that profits will jump 50 percent in the fourth quarter after falling for the past year.
Even if that happens, it may not be enough. In 2001, the last time profits fell as much, they then had to climb for three straight quarters before stocks rebounded. Analysts' earnings estimates for this year still represent a decline from 2006 levels, making the strategists' optimism harder to justify, investors say.
``If they're accurate, I'll give them a big kiss,'' said Randy Bateman, who oversees $15 billion as chief investment officer at Huntington Bancshares Inc. in Columbus, Ohio. ``I don't think those are very realistic figures.''
The S&P 500 dropped 1.2 percent last week to 1,262.90, coming within a percentage point of a ``bear market,'' defined as a 20 percent plummet from its peak in October. Based on the index's closing price of 1,280 on June 30, the average strategist forecast of 1,515 by year-end calls for the biggest rally of any second half for the S&P 500 since Ronald Reagan was in the White House in 1982.
Unrepentant Bull
Strategists at Deutsche Bank, Lehman Brothers and UBS are the most bullish and expect the benchmark for American equities to climb to a record in the second half. Binky Chadha, Deutsche Bank's New York-based chief strategist, says the S&P 500 will end the year at 1,650, up 29 percent from June 30.
Ian Scott, Lehman's global strategist, is predicting an advance of 27 percent to 1,630, while David Bianco at UBS says the index will increase at least 25 percent.
The S&P 500's rebound ``is going to be one of the greatest roars we've seen,'' Bianco said. ``The market has way too many fears baked into the valuation right now. The fear out there is the earnings are about to collapse and interest rates are about to surge on inflationary fears. Neither is going to happen.''
Strategists' annual forecasts have been off by an average of 14 percentage points since 2000, according to data compiled by Bloomberg. They haven't projected an annual decline in at least eight years.
`Monkey With Abacus'
At the start of the year, strategists told clients to expect an average 11 percent advance in the S&P 500 in 2008 to 1,634, Bloomberg data show. The measure has dropped 14 percent so far.
``A monkey with an abacus is probably better at the end of the day,'' said Peter Sorrentino, a Cincinnati-based senior money manager at Huntington Asset Advisors, which oversees $16.7 billion. ``To read the strategists' input is intriguing and thought-provoking, but at the end of the day, you'd better have your own tools. We're nowhere near as optimistic as some of the forecasts.''
The U.S. housing slump, the worst since the Great Depression, will drag down economic growth and profits, and limit share gains, Sorrentino said.
The economy grew 0.45 percent last quarter, according to economists surveyed by Bloomberg. Employers cut jobs for a sixth consecutive month in June, the longest string of payroll declines since the last recession, while service industries shrank, signaling the slowdown may deepen.
Alcoa Kickoff
Profits at S&P 500 companies fell for three straight quarters and are estimated to have dropped 11.2 percent in the second quarter, according to data compiled by Bloomberg. Four consecutive periods of declines would be the most since the last recession in 2001.
Alcoa Inc., the world's third-largest aluminum producer, kicks off the second-quarter earnings season tomorrow. The New York-based company earned 67 cents a share, 17 percent less than a year earlier, according to consensus estimates.
In the third and fourth quarters, analysts expect average profits for S&P 500 companies to increase by 10.5 percent and 49.8 percent. Financial firms -- the hardest hit by the collapse of the subprime mortgage market, with more than $400 billion in credit losses and writedowns globally -- are forecast to report a gain of more than fivefold in the final three months.
Last quarter, earnings at banks, brokerages and insurance companies probably fell 60.1 percent. Under the analysts' projections, profits at U.S. companies would increase by 5.6 percent for the full year.
Paying It Forward
``Earnings in a lot of sectors should look good,'' said James Swanson, Boston-based chief investment strategist at MFS Investment Management, which oversees $204 billion. He expects the S&P 500 to gain 23 percent to 1,580 by Dec. 31. ``Financials should be making money again. There's certainly a lot of wreckage now, but there are bargains out there.''
The Federal Reserve's most aggressive interest rate cuts since the 1980s will lift the market as the benefits for businesses and consumers start to be reflected in share prices, Swanson said. The Fed has lowered the benchmark rate by 3.25 percentage points to 2 percent since September.
Shares may still drop even after earnings recover, which is what happened during the last recession. The S&P 500 lost 13 percent during the five quarters of profit declines between 2001 and 2002. In the last three quarters of 2002, when earnings increased again, the index fell a further 23 percent.
``There's always going to be ebbs and flows in the economy, but we believe that this is a start of a significant bear market,'' David Tice, founder of the $1.2 billion Prudent Bear Fund, said on Bloomberg Television. ``We are going to pay the price for it with much lower stock prices.''
To contact the reporters on this story: Eric Martin in New York at emartin21@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net.
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Japan Stocks Rise, Snap Nikkei's Losing Streak, on Valuations
By Makiko Kitamura and Masaki Kondo
July 7 (Bloomberg) -- Japanese stocks rose, snapping the Nikkei 225 Stock Average's longest losing streak in 54 years, as investors bet shares had become cheap relative to earnings.
Orix Corp., Japan's largest non-bank financial company, rose the most in eight weeks, while Mizuho Financial Group Inc. jumped the most in a month. Canon Inc., which gets a third of its sales from the Americas, climbed after the yen depreciated to the weakest against the dollar in almost two weeks. Tokyu Land Corp. led a gauge of developers to its biggest gain since June 16.
The Nikkei 225 added 122.15, or 0.9 percent, to close at 13,360.04 in Tokyo, breaking a 12-day slide, the longest since 1954. The broader Topix index rose 14.92, or 1.2 percent, to 1,312.80. Almost two stocks advanced for each that slumped.
``Japanese stocks have been sold excessively, and they have become cheap relative to their asset values or earnings,'' said Yoshihiro Ito, senior strategist at Okasan Asset Management Co. in Tokyo, which oversees the equivalent of $9.3 billion.
As of July 4, shares on the Nikkei traded at 16.5 times earnings for the past business year, the lowest since May 13 and below the 20.8 ratio for China's CSI 300 Index, based on Bloomberg data. The Nikkei fell 8.4 percent in the 12 days through July 4, reaching the lowest since April 16.
To contact the reporters on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Australia Stocks: Challenger, Felix, GPT, IAG, Minara, Santos
By Shani Raja
July 7 (Bloomberg) -- The S&P/ASX 200 Index fell 79.60 points, or 1.6 percent, to 5,002.50 at the close in Sydney, reversing Friday's 1.7 percent advance. The broader All Ordinaries Index declined 78.30, or 1.5 percent, to 5,091.70, while the futures index expiring in September lost 1.1 percent to 5,017.
CBH Resources Ltd. (CBH AU), an Australian zinc and lead producer backed by Japan's Toho Zinc Co., dropped 2 cents, or 11 percent, to 17 cents, the lowest since November 2005. The company reported a loss for the 2008 fiscal year after metal prices dropped. The price of zinc has fallen 24 percent this year as mine supplies increased.
Challenger Financial Services Group Ltd. (CGF AU), the Australian fund manager backed by billionaire James Packer, rose 11 cents, or 5.4 percent, to A$2.16, the second-biggest gainer on the index. Challenger will buy back as much as 10 percent of its shares from July 21, the Sydney-based company said in a statement today.
GPT Group (GPT AU), Australia's fourth-largest real estate investment trust by market value, slumped 36 cents, or 15 percent, to A$2.10, the most since 1987, after cutting its full-year operating profit estimate. It was the benchmark index's second- biggest loser.
Insurance Australia Group Ltd. (IAG AU) dropped 7 cents, or 1.9 percent, to A$3.62, the most since June 23. The company may fire 500 workers as part of a review of its business this week, the Sydney Morning Herald reported, without saying where it got the information.
Minara Resources Ltd. (MRE AU), Australia's second-largest nickel producer, tumbled 47 cents, or 16 percent, to A$2.51, the lowest in almost two years. UBS AG and RBC Capital Markets cut their earnings forecasts for the company.
Rio Tinto Group (RIO AU) slumped A$2.45, or 2 percent, to A$123.25. A measure of six metals traded on the London Metal Exchange dropped 1.5 percent, and European Union regulators extended an investigation into BHP' Billiton Ltd.'s hostile bid for Rio, citing ``serious doubts'' over a combination that would control over a third of the world's iron-ore production. BHP (BHP AU) fell declined 95 cents, or 2.3 percent, to A$39.75, the lowest since April 4.
Santos Ltd. (STO AU) fell 55 cents, or 2.8 percent, to A$19.40, the lowest since May 28. Crude oil fell from near a record after Iran said it gave a ``constructive'' response to incentives intended to persuade the country to stop uranium enrichment. A compromise may allay concern Israel is ready to attack Iran's nuclear installations, starting a conflict likely to cut supply from OPEC's second-largest oil producer.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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July 7 (Bloomberg) -- The S&P/ASX 200 Index fell 79.60 points, or 1.6 percent, to 5,002.50 at the close in Sydney, reversing Friday's 1.7 percent advance. The broader All Ordinaries Index declined 78.30, or 1.5 percent, to 5,091.70, while the futures index expiring in September lost 1.1 percent to 5,017.
CBH Resources Ltd. (CBH AU), an Australian zinc and lead producer backed by Japan's Toho Zinc Co., dropped 2 cents, or 11 percent, to 17 cents, the lowest since November 2005. The company reported a loss for the 2008 fiscal year after metal prices dropped. The price of zinc has fallen 24 percent this year as mine supplies increased.
Challenger Financial Services Group Ltd. (CGF AU), the Australian fund manager backed by billionaire James Packer, rose 11 cents, or 5.4 percent, to A$2.16, the second-biggest gainer on the index. Challenger will buy back as much as 10 percent of its shares from July 21, the Sydney-based company said in a statement today.
GPT Group (GPT AU), Australia's fourth-largest real estate investment trust by market value, slumped 36 cents, or 15 percent, to A$2.10, the most since 1987, after cutting its full-year operating profit estimate. It was the benchmark index's second- biggest loser.
Insurance Australia Group Ltd. (IAG AU) dropped 7 cents, or 1.9 percent, to A$3.62, the most since June 23. The company may fire 500 workers as part of a review of its business this week, the Sydney Morning Herald reported, without saying where it got the information.
Minara Resources Ltd. (MRE AU), Australia's second-largest nickel producer, tumbled 47 cents, or 16 percent, to A$2.51, the lowest in almost two years. UBS AG and RBC Capital Markets cut their earnings forecasts for the company.
Rio Tinto Group (RIO AU) slumped A$2.45, or 2 percent, to A$123.25. A measure of six metals traded on the London Metal Exchange dropped 1.5 percent, and European Union regulators extended an investigation into BHP' Billiton Ltd.'s hostile bid for Rio, citing ``serious doubts'' over a combination that would control over a third of the world's iron-ore production. BHP (BHP AU) fell declined 95 cents, or 2.3 percent, to A$39.75, the lowest since April 4.
Santos Ltd. (STO AU) fell 55 cents, or 2.8 percent, to A$19.40, the lowest since May 28. Crude oil fell from near a record after Iran said it gave a ``constructive'' response to incentives intended to persuade the country to stop uranium enrichment. A compromise may allay concern Israel is ready to attack Iran's nuclear installations, starting a conflict likely to cut supply from OPEC's second-largest oil producer.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Stocks in Europe, Asia Advance; U.S. Index Futures Increase
By Sarah Jones
July 7 (Bloomberg) -- Stocks rose in Europe and Asia and U.S. index futures advanced as investors speculated shares were attractive following a rout that left global equities at their cheapest relative to profit in at least 13 years.
J Sainsbury Plc gained after JPMorgan Chase & Co. upgraded the food retailer, saying the shares were cheap compared with earnings. China Merchants Bank Co. climbed after forecasting higher profits. Awilco Offshore ASA rallied 16 percent after China Oilfield Services Ltd. offered about $2.49 billion for the Norwegian oil and gas drilling contractor.
The MSCI World Index added 0.1 percent to 1,368.16 at 8:05 a.m. in London as nine of the 10 industry groups increased. Futures on the Standard & Poor's 500 Index rose 0.7 percent.
``Equity markets have overreacted on the downside,'' said Jeremy Batstone-Carr, a London-based equity strategist at Charles Stanley Group. ``The market has already anticipated quite a market fall in return on equity. Pretty much all'' of the bad news has been priced into shares, he said.
The MSCI World, which has fallen for five straight weeks, closed last week at its cheapest relative to earnings since at least 1995, based on data compiled by Bloomberg News. The index is valued at 14.3 times earnings.
Europe's Dow Jones Stoxx 600 Index advanced 0.8 percent, while the MSCI Asia Pacific Index increased 0.3 percent.
Sainsbury climbed 3.3 percent to 289 pence. JPMorgan raised its recommendation on the third-largest U.K. supermarket chain to ``overweight'' the ``neutral.'' The brokerage also upgraded Tesco, the biggest U.K. food retailer, to ``neutral'' from ``underweight.'' The stock rose 0.4 percent to 360.7 pence.
Attractive Sector
``For the first time in at least two years, we believe that the valuation of the European food retail sector is attractive,'' London-based analyst Jaime Vazquez wrote in a note to investors. ``It is cheap in absolute terms and also relative to other defensive consumer sectors.''
China Merchants, the country's most profitable bank, rose 6.1 percent to HK$24.25 in Hong Kong, poised for its largest gain since April 2. The company said first-half profit may have more than doubled as it extended more loans.
Awilco surged 11.3 kroner to 82.9. China Oilfield Services, a unit of the nation's third-biggest oil producer, agreed to buy Awilco for about 12.7 billion kroner ($2.49 billion).
China Oilfield is offering 85 kroner a share in cash in the deal to create the world's eighth-largest rig fleet, the Oslo- based company said.
Fresenius
Fresenius SE dropped 2.8 percent to 53 euros after the drugmaker agreed to buy U.S.-based APP Pharmaceuticals Inc. for $3.7 billion.
APP shareholders will receive $23 a share and tradable rights that may generate as much as $6 a share, payable in 2011, the company said.
Air France-KLM Group rose 0.9 percent to 14.28 euros. Europe's biggest airline said passenger traffic increased 2.6 percent in June, led by the Middle East and Africa and the Americas.
Bang & Olufsen A/S fell 8.8 percent to 171.5 kroner after the Danish stereo maker cut its profit forecast for the third time this year because of ``uncertain'' markets and weaker orders for its luxury consumer electronics.
Operating profit will come to about 195 million kroner, the company said, below its prior prediction of between 225 million and 275 million kroner.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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July 7 (Bloomberg) -- Stocks rose in Europe and Asia and U.S. index futures advanced as investors speculated shares were attractive following a rout that left global equities at their cheapest relative to profit in at least 13 years.
J Sainsbury Plc gained after JPMorgan Chase & Co. upgraded the food retailer, saying the shares were cheap compared with earnings. China Merchants Bank Co. climbed after forecasting higher profits. Awilco Offshore ASA rallied 16 percent after China Oilfield Services Ltd. offered about $2.49 billion for the Norwegian oil and gas drilling contractor.
The MSCI World Index added 0.1 percent to 1,368.16 at 8:05 a.m. in London as nine of the 10 industry groups increased. Futures on the Standard & Poor's 500 Index rose 0.7 percent.
``Equity markets have overreacted on the downside,'' said Jeremy Batstone-Carr, a London-based equity strategist at Charles Stanley Group. ``The market has already anticipated quite a market fall in return on equity. Pretty much all'' of the bad news has been priced into shares, he said.
The MSCI World, which has fallen for five straight weeks, closed last week at its cheapest relative to earnings since at least 1995, based on data compiled by Bloomberg News. The index is valued at 14.3 times earnings.
Europe's Dow Jones Stoxx 600 Index advanced 0.8 percent, while the MSCI Asia Pacific Index increased 0.3 percent.
Sainsbury climbed 3.3 percent to 289 pence. JPMorgan raised its recommendation on the third-largest U.K. supermarket chain to ``overweight'' the ``neutral.'' The brokerage also upgraded Tesco, the biggest U.K. food retailer, to ``neutral'' from ``underweight.'' The stock rose 0.4 percent to 360.7 pence.
Attractive Sector
``For the first time in at least two years, we believe that the valuation of the European food retail sector is attractive,'' London-based analyst Jaime Vazquez wrote in a note to investors. ``It is cheap in absolute terms and also relative to other defensive consumer sectors.''
China Merchants, the country's most profitable bank, rose 6.1 percent to HK$24.25 in Hong Kong, poised for its largest gain since April 2. The company said first-half profit may have more than doubled as it extended more loans.
Awilco surged 11.3 kroner to 82.9. China Oilfield Services, a unit of the nation's third-biggest oil producer, agreed to buy Awilco for about 12.7 billion kroner ($2.49 billion).
China Oilfield is offering 85 kroner a share in cash in the deal to create the world's eighth-largest rig fleet, the Oslo- based company said.
Fresenius
Fresenius SE dropped 2.8 percent to 53 euros after the drugmaker agreed to buy U.S.-based APP Pharmaceuticals Inc. for $3.7 billion.
APP shareholders will receive $23 a share and tradable rights that may generate as much as $6 a share, payable in 2011, the company said.
Air France-KLM Group rose 0.9 percent to 14.28 euros. Europe's biggest airline said passenger traffic increased 2.6 percent in June, led by the Middle East and Africa and the Americas.
Bang & Olufsen A/S fell 8.8 percent to 171.5 kroner after the Danish stereo maker cut its profit forecast for the third time this year because of ``uncertain'' markets and weaker orders for its luxury consumer electronics.
Operating profit will come to about 195 million kroner, the company said, below its prior prediction of between 225 million and 275 million kroner.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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Germany Stocks Update: DAX Index Rises 50.60 to 6,322.81
By Daniel Hauck
July 7 (Bloomberg) -- Germany's benchmark stock index, the DAX Index, rose 0.81 percent at 9:05 a.m.
The index of 30 companies traded on the Frankfurt Stock Exchange rose 50.60 to 6,322.81. Among the stocks in the index, 28 rose and 2 fell.
Gains in the DAX were led by Siemens Ag, Deutsche Bank Ag and Allianz Se. About 1.98 million shares traded in the DAX.
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July 7 (Bloomberg) -- Germany's benchmark stock index, the DAX Index, rose 0.81 percent at 9:05 a.m.
The index of 30 companies traded on the Frankfurt Stock Exchange rose 50.60 to 6,322.81. Among the stocks in the index, 28 rose and 2 fell.
Gains in the DAX were led by Siemens Ag, Deutsche Bank Ag and Allianz Se. About 1.98 million shares traded in the DAX.
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French Stocks: Alstom, Arcelor, STMicroelectronics, Thomson
By Adria Cimino
July 7 (Bloomberg) -- France's CAC 40 Index advanced 44.74, or 1.1 percent, to 4,310.74 at 9:16 a.m. in Paris, after falling 3 percent last week. The SBF 120 Index also gained 1.1 percent.
The following stocks rose or fell in Paris. Stock symbols are in parentheses.
Alstom SA (ALO FP) added 1.57 euros, or 2.1 percent, to 75.74, extending last week's 1.4 percent increase. The world's largest train maker is seeking acquisitions in Russia as the country's rail monopoly pursues its biggest modernization since the Soviet era.
ArcelorMittal (MTP FP) gained 93 cents, or 1.7 percent, to 54.51, rebounding from five days of losses. The world's biggest steelmaker said it bought back 5.31 million shares for 297.8 million euros ($465 million).
Electricite de France SA (EDF FP) rose 75 cents, or 1.3 percent, to 58.84 euros, climbing for a second day. The operator of 58 nuclear reactors in France will pursue projects in South Africa, China, the U.K. and the U.S., Chief Executive Officer Pierre Gadonneix said.
STMicroelectronics NV (STM FP) climbed 12 cents, or 2 percent, to 6.58, rebounding from a 4 percent drop last week. Royal Bank of Scotland raised its recommendation on shares of Europe's biggest chipmaker to ``hold'' from ``sell,'' as the stock trades below the analysts' share-price estimate of 6.80 euros.
Thomson SA (TMS FP) added 8 cents, or 2.9 percent, to 2.85 euros after the shares plunged 20 percent last week. The world's largest supplier of television set-top boxes said it won an order for digital-to-analog adapters from Comcast, a cable provider.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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July 7 (Bloomberg) -- France's CAC 40 Index advanced 44.74, or 1.1 percent, to 4,310.74 at 9:16 a.m. in Paris, after falling 3 percent last week. The SBF 120 Index also gained 1.1 percent.
The following stocks rose or fell in Paris. Stock symbols are in parentheses.
Alstom SA (ALO FP) added 1.57 euros, or 2.1 percent, to 75.74, extending last week's 1.4 percent increase. The world's largest train maker is seeking acquisitions in Russia as the country's rail monopoly pursues its biggest modernization since the Soviet era.
ArcelorMittal (MTP FP) gained 93 cents, or 1.7 percent, to 54.51, rebounding from five days of losses. The world's biggest steelmaker said it bought back 5.31 million shares for 297.8 million euros ($465 million).
Electricite de France SA (EDF FP) rose 75 cents, or 1.3 percent, to 58.84 euros, climbing for a second day. The operator of 58 nuclear reactors in France will pursue projects in South Africa, China, the U.K. and the U.S., Chief Executive Officer Pierre Gadonneix said.
STMicroelectronics NV (STM FP) climbed 12 cents, or 2 percent, to 6.58, rebounding from a 4 percent drop last week. Royal Bank of Scotland raised its recommendation on shares of Europe's biggest chipmaker to ``hold'' from ``sell,'' as the stock trades below the analysts' share-price estimate of 6.80 euros.
Thomson SA (TMS FP) added 8 cents, or 2.9 percent, to 2.85 euros after the shares plunged 20 percent last week. The world's largest supplier of television set-top boxes said it won an order for digital-to-analog adapters from Comcast, a cable provider.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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LBO Market Gets a Boost as BCE Compromises With Buyers, Banks
By Jason Kelly and Frederic Tomesco
July 7 (Bloomberg) -- BCE Inc. struck a compromise with its private-equity buyers and their lenders, keeping the world's largest leveraged buyout on track to be completed and giving a lift to the moribund takeover market.
A group led by Ontario Teachers' Pension Plan will close the C$52 billion ($51 billion) purchase by Dec. 11, Montreal- based BCE said in a July 4 statement. The three-month delay gives the banks more time to sell debt used to finance the LBO, while a decision by BCE not to pay common stock dividends effectively lowers the buyers' costs by more than C$900 million.
The transaction is one of the few to survive the global credit contraction that ended the buyout boom a year ago. Banks may increase LBO lending once the market absorbs the C$34 billion of bonds and loans issued for the BCE deal, said Rick Nathan, a managing director at Kensington Capital Partners Ltd. in Toronto.
``Given the overall environment for LBOs, this is quite an accomplishment by the buyer group,'' said Nathan, whose firm oversees about C$400 million in private-equity assets. ``There is a fundamentally different psychology in the marketplace. The sun is starting to come up.''
Banks have cut the backlog of LBO loans made before credit markets seized up in August to less than $100 billion from $350 billion, according to fixed-income research firm CreditSights Inc. in New York. The reduction came as more than 60 deals announced last year valued at a combined $174 billion were abandoned, including purchases of Alliance Data Systems Inc. and Harman International Industries Inc., according to data compiled by Bloomberg.
Shares Climb
Banks also are unloading debt committed to takeovers including those of Clear Channel Communications Inc. and Chrysler LLC by selling it at discounts of as much as 35 percent.
BCE rose C$4.49, or 13 percent, to C$39.64 on July 4 in Toronto Stock Exchange trading, the biggest gain since April 2002. The U.S. markets were closed in observance of the Independence Day holiday.
The company, Canada's largest phone carrier, agreed in June 2007 to be acquired for C$42.75 a share, or C$34.2 billion, topping the $32 billion acquisition of Dallas-based power producer TXU Corp. completed last October as the biggest LBO.
Toronto-based Ontario Teachers', Canada's third-largest pension manager, teamed up with Rhode Island-based Providence Equity Partners Inc. to take BCE private. Madison Dearborn Partners LLC in Chicago and New York-based Merrill Lynch & Co. also are investing in the deal, which is being financed by banks led by New York-based Citigroup Inc. and Deutsche Bank AG of Frankfurt .
Huntsman, Penn National
BCE avoided the fate of other soured deals, some of which remain mired in litigation. Huntsman Corp., the chemical-maker that last year agreed to be bought by Apollo Management LP- controlled Hexion Speciality Chemicals Inc., sued New York-based Apollo's founding partners in Texas after that deal collapsed.
Fortress Investment Group LLC and Centerbridge Partners LP scrapped their $6.1 billion takeover of racetrack and casino owner Penn National Gaming Inc. on July 3. The private-equity firms paid the company $225 million and provided a $1.25 billion interest-free loan to end the deal.
Even after losing more than 1 million local-phone customers in the past three years to rivals such as cable companies, BCE dominates the Canadian telecommunications industry. As of March 31, BCE had about 7.7 million local-phone subscribers, 6.3 million wireless customers and 2 million high-speed Internet users. In the first quarter, BCE's cash flow from operations amounted to C$894 million.
Dividend Withheld
The BCE deal played out similarly to the conclusion of Clear Channel's purchase. That transaction averted failure after Thomas H. Lee Partners LP and Bain Capital LLC agreed to a reduced offer of $36 a share, or 8.2 percent less than the price that the buyout firms committed to pay last year.
The new BCE deal allows the buyers to dodge another round of approvals, including by shareholders, since it doesn't change the purchase price.
The common share dividend, which had been deferred last week, won't be paid, though preferred shareholders will get a dividend. The buyers must also pay a breakup fee of C$1.2 billion, or 20 percent more than in the original agreement, if the purchase doesn't get done.
While the BCE deal's survival gives a boost to the LBO market, it doesn't signal a return of the debt markets to full health, said Edward Nash, managing director and head of mergers and acquisitions at Canadian Imperial Bank of Commerce's CIBC World Markets unit in Toronto.,
``For that, we need to ride through the current credit crisis,'' he said.
To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net; Frederic Tomesco in Montreal at tomesco@bloomberg.net.
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Fresenius Kabi Buys APP to Enter U.S. Generics Market
By Angela Cullen
July 7 (Bloomberg) -- Fresenius SE, owner of the world's largest provider of dialysis, agreed to buy APP Pharmaceuticals Inc. for $3.7 billion to enter the U.S. market for generic intravenous medicines.
APP shareholders will receive $23 a share and tradable rights that may generate as much as $6 a share, payable in 2011, Bad Homburg, Germany-based Fresenius said in a statement on DGAP wire today. The offer, excluding the tradable rights, is 29 percent more than APP's closing price of $17.82 on July 3, the last day the shares traded.
The acquisition gives Fresenius's Kabi nutrition unit more than 100 patent-free products for hospital patients receiving cancer, intensive care and infection treatments as well as anesthetics. Fresenius expects the takeover to be earnings- neutral in the first year and add ``clearly'' to profit in the second year.
``The acquisition is an important step in Fresenius Kabi's growth strategy,'' the German company said in the statement. ``This North American platform provides further attractive growth opportunities for Fresenius Kabi's existing product portfolio.''
APP, based in Schaumburg, Illinois, is targeting sales of $730 million to $750 million this year and adjusted earnings before interest, tax, depreciation and amortization of $285 million to $300 million. The U.S. company, founded by Patrick Soon-Shiong, will merge with a U.S. subsidiary of Fresenius Kabi.
Soon-Shiong, who owns more than 80 percent of APP, agreed to sell his stake. APP's board has approved the transaction.
To contact the reporter on this story: Angela Cullen in Frankfurt at acullen8@bloomberg.net
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July 7 (Bloomberg) -- Fresenius SE, owner of the world's largest provider of dialysis, agreed to buy APP Pharmaceuticals Inc. for $3.7 billion to enter the U.S. market for generic intravenous medicines.
APP shareholders will receive $23 a share and tradable rights that may generate as much as $6 a share, payable in 2011, Bad Homburg, Germany-based Fresenius said in a statement on DGAP wire today. The offer, excluding the tradable rights, is 29 percent more than APP's closing price of $17.82 on July 3, the last day the shares traded.
The acquisition gives Fresenius's Kabi nutrition unit more than 100 patent-free products for hospital patients receiving cancer, intensive care and infection treatments as well as anesthetics. Fresenius expects the takeover to be earnings- neutral in the first year and add ``clearly'' to profit in the second year.
``The acquisition is an important step in Fresenius Kabi's growth strategy,'' the German company said in the statement. ``This North American platform provides further attractive growth opportunities for Fresenius Kabi's existing product portfolio.''
APP, based in Schaumburg, Illinois, is targeting sales of $730 million to $750 million this year and adjusted earnings before interest, tax, depreciation and amortization of $285 million to $300 million. The U.S. company, founded by Patrick Soon-Shiong, will merge with a U.S. subsidiary of Fresenius Kabi.
Soon-Shiong, who owns more than 80 percent of APP, agreed to sell his stake. APP's board has approved the transaction.
To contact the reporter on this story: Angela Cullen in Frankfurt at acullen8@bloomberg.net
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Chalco Suspends Aluminum Smelter in Shanxi on Power
By Xiao Yu
July 7 (Bloomberg) -- Aluminum Corp. of China Ltd., the nation's biggest producer of the metal, halted production at a venture in the northern province of Shanxi because of a power shortage.
The provincial government ordered smelters to cut capacity to ensure power supply for farming, Wang Suomin, a manager at the Shanxi Huaze Aluminum & Power Co. venture, said by phone today. The venture has an annual capacity of 280,000 metric tons.
Power shortages may have halted 700,000 tons of capacity in Shanxi, research company CBI China Co. said today. That's nearly 5 percent of national output in the world's largest producer. Global aluminum prices have rallied 31 percent this year after snowstorms in China curbed output.
``This will boost aluminum prices,'' Le Yukun, an analyst at BOC International Ltd., said by phone from Shanghai. ``Power shortages may spread and worsen, forcing more output cuts.''
Aluminum for three month delivery gained 0.4 percent to trade at $3,172 a ton on the London Metal Exchange at 11:30 a.m. Beijing time. The metal rose 0.1 percent to trade at 19,385 yuan on the Shanghai Futures Exchange.
China's summer power shortfall will reach 16 gigawatts, the state-run China Daily reported on July 1, citing the electricity regulator. The country is in its sixth year of power shortages.
There is a power shortage in the Shanxi province, said Zhang Qing, a spokeswoman with Beijing-based Aluminum Corp, better known as Chalco. Zhang said she couldn't comment on what's happening with production.
Huaze's Wang didn't give a loss estimate at the venture, which is between Chalco and Shanxi Zhangze Electric Power Co.
The Shanxi provincial government ordered smelters to cut capacity by 50 percent, CBI analyst Eric Zhang said today. CBI didn't name smelters affected.
China is the world's largest producer of aluminum, which is used in aircraft and cars, with a total capacity of more than 15 million tons.
To contact the reporter on this story: Xiao Yu in Beijing at yxiao@bloomberg.net.
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July 7 (Bloomberg) -- Aluminum Corp. of China Ltd., the nation's biggest producer of the metal, halted production at a venture in the northern province of Shanxi because of a power shortage.
The provincial government ordered smelters to cut capacity to ensure power supply for farming, Wang Suomin, a manager at the Shanxi Huaze Aluminum & Power Co. venture, said by phone today. The venture has an annual capacity of 280,000 metric tons.
Power shortages may have halted 700,000 tons of capacity in Shanxi, research company CBI China Co. said today. That's nearly 5 percent of national output in the world's largest producer. Global aluminum prices have rallied 31 percent this year after snowstorms in China curbed output.
``This will boost aluminum prices,'' Le Yukun, an analyst at BOC International Ltd., said by phone from Shanghai. ``Power shortages may spread and worsen, forcing more output cuts.''
Aluminum for three month delivery gained 0.4 percent to trade at $3,172 a ton on the London Metal Exchange at 11:30 a.m. Beijing time. The metal rose 0.1 percent to trade at 19,385 yuan on the Shanghai Futures Exchange.
China's summer power shortfall will reach 16 gigawatts, the state-run China Daily reported on July 1, citing the electricity regulator. The country is in its sixth year of power shortages.
There is a power shortage in the Shanxi province, said Zhang Qing, a spokeswoman with Beijing-based Aluminum Corp, better known as Chalco. Zhang said she couldn't comment on what's happening with production.
Huaze's Wang didn't give a loss estimate at the venture, which is between Chalco and Shanxi Zhangze Electric Power Co.
The Shanxi provincial government ordered smelters to cut capacity by 50 percent, CBI analyst Eric Zhang said today. CBI didn't name smelters affected.
China is the world's largest producer of aluminum, which is used in aircraft and cars, with a total capacity of more than 15 million tons.
To contact the reporter on this story: Xiao Yu in Beijing at yxiao@bloomberg.net.
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Bernanke's Emerging-Market Disciples May Need to Follow Volcker
By John Fraher and Shamim Adam
July 7 (Bloomberg) -- Policy makers in emerging economies from Russia to Vietnam may have to start acting less like Ben S. Bernanke and more like Paul Volcker if they want to bring inflation under control.
With currencies tied to the U.S. dollar, officials in many developing countries have had to keep their monetary policies linked to the Federal Reserve's. Now, after chairman Bernanke led the Fed's most aggressive easing in two decades, their central banks find themselves with interest rates too low for their economies and the worst bout of inflation in a generation.
``There's a lack of independent monetary policy; it's been inappropriately stimulative,'' says Nariman Behravesh, chief economist with Global Insight in Lexington, Massachusetts. The answer, he says, may be to ``tighten credit more aggressively,'' the way then-chairman Volcker did in the early 1980s.
Such a policy shift would mean pushing borrowing costs above the level of inflation and keeping them there even at the cost of a steep slowdown that might send commodity prices into a tailspin. Faced with inflation that approached 15 percent in 1980, Volcker pushed interest rates as high as 20 percent and drove the U.S. into its deepest recession since the 1930s.
Prices are now surging across the developing world. China's inflation rate stayed near a 12-year high of 8.7 percent in May; prices in Vietnam jumped 27 percent in June and Indian wholesale prices increased 11.6 percent last month, the fastest in 13 years. Inflation exceeds benchmark lending rates in China, Russia, India and at least a dozen other emerging economies.
Doing Something
``They can't sit on their hands any longer, and need to start reacting in order to be seen to be doing something,'' says Robert Prior-Wandesforde, an economist at HSBC Holdings Plc in Singapore. ``Interest rates do need to go a lot higher.''
Rate increases big enough to slow down some of the world's fastest-growing economies would help Bernanke, 54, and European Central Bank President Jean-Claude Trichet in their own inflation fights by cooling the commodity-price boom.
Trichet, 65, said in an interview last month that there's a risk of inflation ``exploding'' if central banks don't act decisively; the ECB last week raised its benchmark lending rate a quarter point to a seven-year high of 4.25 percent. The price of oil has almost doubled in the past year, touching a record $145.85 on July 3, and wheat and rice prices jumped more than 50 percent in the same period.
Food and Energy
The surge in commodity prices poses a particular problem in emerging economies because food and energy account for a bigger share of overall inflation than in the U.S. or Western Europe -- more than 40 percent in India, Thailand and Turkey, compared with about 25 percent in the U.S., Morgan Stanley says.
Volcker's track record is already being invoked by some officials in Asia. Singapore Finance Minister Tharman Shanmugaratnam on June 27 praised the former Fed chairman, now 80, for ``reversing the psychology of inflation'' and said Asian central bankers must realize they need to tighten credit before it's too late. Volcker wasn't available for comment.
While India, Taiwan, the Philippines, Chile, Mexico, Egypt, Brazil and Russia all raised interest rates last month, the danger is that they've already waited too long, and that measures strong enough to curb inflation now would risk sinking their economies.
`The Sheer Difficulty'
``The sheer difficulty of achieving stability on the growth and inflation fronts will be a shock for Asian assets, equities and currencies,'' says Stephen Jen, chief currency strategist at Morgan Stanley in London. ``It's almost impossible for them to get ahead of inflation.''
Jen says China needs to lift its real interest rate, currently near zero, by about 8 percentage points. JPMorgan Chase & Co. calculates that the average real rate across emerging nations stands at 2.3 percent, compared with 3.7 percent a year ago.
``They're hundreds of basis points away from a restrictive policy,'' says David Hensley, JPMorgan's director of global economic coordination in New York.
The monetary policies of emerging economies, devised in the aftermath of the Asian financial crisis a decade ago, now are part of the global inflation problem. By directly or indirectly tying their currencies to the dollar, many emerging economies suffer the imported inflation that normally accompanies a weakening exchange rate.
Dollar Link
The dollar link, though, also ties their policies to those of the Fed, which cut its key lending rate by 3.25 percentage points in eight months even as the inflation rate doubled.
China still limits trading in the yuan three years after dropping a peg to the dollar. Malaysia continues to ban offshore trading of the ringgit, and Vietnam controls its currency's trading band against the dollar.
Bank of England Governor Mervyn King said June 26 that Asia is contributing to global monetary policy that's ``a little lax.'' A day later, Fed Vice Chairman Donald Kohn urged ``actions to contain inflation'' in the world's fastest growing economies.
Some central banks are also constrained by political pressures that have made them too willing to accommodate growth, says Venkatraman Anantha-Nageswaran at Bank Julius Baer & Co.
Caving In
China's central bank, which is controlled by the government, has yet to make good on a pledge to raise rates this year. Indonesia's central bank last year caved in to pressure from Vice President Jusuf Kalla to cut rates. Inflation accelerated to a 21-month high of 11 percent, leading the bank to raise the benchmark rate last week for the third month in a row.
In Malaysia, Second Finance Minister Nor Mohamed Yakcop on June 24 said the central bank is ``not independent of the government'' and that inflation at a nine-year high doesn't pose a ``major challenge.''
``The prosperity story has been built so much on leverage and liquidity and they need growth to keep on rolling,'' says Anantha-Nageswaran, Julius Baer's Singapore-based head of research in Asia. ``They are so afraid that what they've built is not a house of bricks, but a house of cards. There is a lack of institutional maturity in Asia.''
Inflation-targeting systems have also had limited success. Turkey last month abandoned its price goal after missing it for two years; Russia is struggling to hit its own target while managing the ruble. Morgan Stanley says inflation exceeds targets in at least 19 emerging economies.
In the absence of effective strategies, a ``hard landing'' may be the only way to get inflation down, says Morgan Stanley's Jen.
``There does not seem to be another way out,'' Jen says. ``Until recently, the emerging markets were seen as a safe haven from the financial crisis. The tables have turned.''
To contact the reporters on this story: John Fraher in London at jfraher@bloomberg.netShamim Adam in Singapore at sadam2@bloomberg.net
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Bank of Japan Says Economy Worsened in Eight of Nine Regions
By Mayumi Otsuma
July 7 (Bloomberg) -- The Bank of Japan said the economy has worsened in eight of the country's nine regions since April as costlier energy and raw materials slowed the expansion.
``Growth of the economy as a whole continued slowing recently, mainly due to the effects of high energy and material prices, although there were some regional differences,'' the central bank said in a quarterly report today. The central bank lowered its assessment of consumer spending in all nine regions.
Bank of Japan Governor Masaaki Shirakawa and his colleagues will consider the evaluations when they assess the overall economy and set interest-rate policy at a meeting ending July 15. Shirakawa said today that Japan will keep expanding, playing down concern that the country is headed for its first recession since 2001.
The policy board may say next week that the economy is slowing more than it had expected in April, when it forecast economic growth of 1.5 percent for the year ending March 2009.
``Governor Shirakawa probably wants to know how inflationary expectations of consumers and businesses in the regions are developing, and how companies are setting prices,'' said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute and a former Bank of Japan official. ``The bank wants to get first-hand voices from branches nationwide.''
Shirakawa said economic growth ``will probably keep decelerating for the time being, but return to a moderate expansionary path thereafter.''
Capital investment and export growth are slowing and profits are decreasing because of rising commodity costs, the governor said. Global inflation is accelerating, financial markets remain volatile and the U.S. economic outlook is ``uncertain,'' he said.
Tohoku in northern Japan was the only region that didn't have its economic assessment cut, the central bank said.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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July 7 (Bloomberg) -- The Bank of Japan said the economy has worsened in eight of the country's nine regions since April as costlier energy and raw materials slowed the expansion.
``Growth of the economy as a whole continued slowing recently, mainly due to the effects of high energy and material prices, although there were some regional differences,'' the central bank said in a quarterly report today. The central bank lowered its assessment of consumer spending in all nine regions.
Bank of Japan Governor Masaaki Shirakawa and his colleagues will consider the evaluations when they assess the overall economy and set interest-rate policy at a meeting ending July 15. Shirakawa said today that Japan will keep expanding, playing down concern that the country is headed for its first recession since 2001.
The policy board may say next week that the economy is slowing more than it had expected in April, when it forecast economic growth of 1.5 percent for the year ending March 2009.
``Governor Shirakawa probably wants to know how inflationary expectations of consumers and businesses in the regions are developing, and how companies are setting prices,'' said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute and a former Bank of Japan official. ``The bank wants to get first-hand voices from branches nationwide.''
Shirakawa said economic growth ``will probably keep decelerating for the time being, but return to a moderate expansionary path thereafter.''
Capital investment and export growth are slowing and profits are decreasing because of rising commodity costs, the governor said. Global inflation is accelerating, financial markets remain volatile and the U.S. economic outlook is ``uncertain,'' he said.
Tohoku in northern Japan was the only region that didn't have its economic assessment cut, the central bank said.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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South Korean Authorities to Stem `Excessive' Won Drop
By William Sim and Bomi Lim
July 7 (Bloomberg) -- South Korea authorities will work to halt ``excessive'' moves in the won, Asia's second-biggest declining currency this year, including using foreign-exchange reserves to stem its drop.
The won climbed 1.1 percent to 1,038.30 per dollar at 9:48 a.m. in Seoul after the finance ministry and Bank of Korea issued statements today addressing their concern over the currency's more than 10 percent decline in 2008. ``We'll take stern action if necessary when the market imbalance becomes excessive,'' the ministry said in Gwacheon.
``It is urgent to restore credibility in the market,'' Ahn Byung Chan, director-general of the central bank's international bureau, told reporters. ``Perceptions in the market are not in line with the government's intention.''
Asia's economies were crippled by a currency crisis a decade ago when Thailand's devaluation of the baht prompted investors to pull money from the region. Countries including Indonesia, Thailand and South Korea spent most of their foreign reserves to prop up their exchange rates and had to borrow more than $100 billion from the International Monetary Fund.
``Authorities are concerned about the foreign-exchange market moving in only one direction too much,'' the finance ministry said in today's statement.
South Korea's won 10.2 percent drop this year is second only to an 11.7 percent slump in the Thai baht, according to Bloomberg data. A declining won has exacerbated the nation's inflation pressures by making imports more expensive.
Consumer prices in South Korea surged 5.5 percent in June from a year earlier, the biggest increase in a decade and exceeding the central bank's target for an eighth straight month.
`Top Priority'
``The government has set top priority on stabilizing inflation and we will have to manage the foreign-exchange market to meet that goal,'' said Choi Jong Ku, head of the ministry's international finance bureau. ``We will use foreign-exchange reserves again if necessary'' to curb the won's decline, he said.
Asia's policy makers have accumulated foreign-exchange reserves since the 1997 crisis. South Korea had $258 billion in reserves at the end of June, the sixth-highest in the world, trailing only China, Japan, Russia, India and Taiwan.
Financial authorities bought $7 billion of won since the end of May to help support the currency, the JoongAng Ilbo newspaper reported on July 1.
``Policy makers are trying to suppress a rise in import prices by intervening in the foreign-exchange market,'' said Chun Chong Woo, an economist at SC First Bank Korea Ltd. in Seoul.
No Crisis
Bank of Korea Deputy Governor Rhee Gwang-Ju, in a July 2 interview, said this year's decline in Asian currencies doesn't signal a repeat of the region's 1997 crisis.
Those comments were echoed by Asian Development Bank President Haruhiko Kuroda. ``I don't think currencies in the region would be under significant pressure in the coming months or years,'' he said in Tokyo last week.
Finance ministers from 13 Asian nations, including South Korea, Japan and China, agreed in May to create a pool of at least $80 billion in foreign-exchange reserves to be tapped by nations in case they need to protect their currencies. That was an expansion of the so-called Chiang Mai Initiative under which pairs of nations would lend each other money at favorable terms if help is needed to support their exchange rates.
``I don't think any of them would request IMF or Chiang Mai Initiative supports,'' Kuroda said on July 4.
To contact the reporters on this story: William Sim in Seoul at wsim2@bloomberg.net; Bomi Lim in Seoul at blim30@bloomberg.net.
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