Economic Calendar

Thursday, September 15, 2011

Treasury Department’s Watchdog Probes Federal Bank Role in Solyndra’s Loan

By Alison Vekshin - Sep 15, 2011 1:32 AM GMT+0700

The U.S. Treasury Department’s inspector general is investigating the Federal Financing Bank’s role in providing $527 million of federal financing to Solyndra LLC, a solar-panel manufacturer that filed for bankruptcy protection this month.

The watchdog is examining the circumstances of the loan, part of a process that occurs “whenever there are questions raised as to the efficiency or integrity of a Treasury program or operation,” Rich Delmar, counsel to the Treasury’s inspector general, said today in an e-mailed statement.

Solyndra, promoted by the Obama administration as a successful example of stimulus money spurring development of a clean-energy industry, filed for bankruptcy on Sept. 6. The Federal Bureau of Investigation raided the company’s Fremont, California, headquarters two days later joined by the Energy Department’s office of inspector general, which has questioned the Obama administration’s documentation of loan guarantees.

The financing bank, part of the Treasury, loaned money to Solyndra under the administration’s guarantees. David Miller, a Solyndra spokesman, didn’t have an immediate response to the investigation.

An inspector general’s routine audit of the Federal Financing Bank for fiscal 2010, using an independent public accountant, reviewed whether some disbursements for the Solyndra loan were properly authorized and recorded, and “found that they were,” Delmar said.

Republicans on the U.S. House Energy and Commerce Committee today released findings from a seven-month investigation into U.S. support for the company before a hearing where lawmakers questioned two administration officials about White House support for the company and its goals for clean energy.

To contact the reporter on this story: Alison Vekshin in San Francisco at

To contact the editors responsible for this story: Mark Tannenbaum at; Larry Liebert at


Greece Is to Remain in Euro: Sarkozy, Merkel

By Helene Fouquet and Eleni Chrepa - Sep 15, 2011 1:53 PM GMT+0700

Sept. 15 (Bloomberg) -- Richard Sulik, chairman of the Freedom and Solidarity party, a member of Slovakia’s coalition government, talks about the European sovereign-debt crisis and the possiblity of a default by Greece. Sulik said his party will vote in parliament against the European bailout system. He spoke with Bloomberg's Radoslav Tomek in Bratislava, Slovakia, on Sept. 13. (Source: Bloomberg)

German Chancellor Angela Merkel and French President Nicolas Sarkozy. Photographer: Steffen Kugler/Bundesregierung-Pool via Getty Images

French President Nicolas Sarkozy and German Chancellor Angela Merkel said they are “convinced” Greece will stay in the euro area as they faced international calls to step up efforts in fighting the region’s debt crisis.

The euro rose after the leaders of Europe’s two biggest economies issued a statement yesterday following a telephone conversation with Greek Prime Minister George Papandreou. It erased most of those gains today. Papandreou committed to meet deficit-reduction targets demanded as a condition for an international bailout, according to statements from governments in Berlin, Athens and Paris.

European governments are aiming to ratify a July 21 agreement to bolster the euro region’s bailout fund and extend a second rescue to Greece. Investor skittishness over the spread of the debt crisis has raised banks’ funding costs and roiled markets worldwide.

“I am skeptical that this will help to reassure markets,” Tullia Bucco, an economist at UniCredit Global Research in Milan, said of the leaders’ statement. “The road to the implementation of the second aid package is still quite long and may prove bumpy.”

The euro was up 0.1 percent to $1.3731 at 8:43 a.m. in Berlin, as futures on the Euro Stoxx 50 Index added 1.2 percent.

Geithner’s Travels

Treasury Secretary Timothy F. Geithner will travel to Wroclaw, Poland, to attend a session for the first time of the European Union’s Economic and Financial Affairs Council that begins tomorrow. Chinese Premier Wen Jiabao yesterday called on other countries to “put their houses in order.”

Underscoring divisions in Europe, European Commission President Jose Barroso said he was close to proposing options on joint euro-area bond sales, putting officials in Brussels on a collision course with Germany over steps to contain the sovereign debt crisis.

“The commission will soon present options for the introduction of euro bonds,” Barroso told the European Parliament yesterday in Strasbourg, France, prompting applause from lawmakers who have backed the idea and a swift rejection from officials in Berlin. “Some of these options could be implemented within the terms of the current treaty; others would require treaty change.”

In the three-way telephone call, Papandreou committed to enacting policies demanded by the EU and International Monetary fund to keep the bailout funds flowing. Sarkozy and Merkel “are convinced that the future of Greece is in the euro zone,” the French statement said.

Greek Steps

The Greek Cabinet this month endorsed measures to help meet deficit targets of 17.1 billion euros ($23.6 billion) in 2011 and 14.9 billion euros in 2012, covering a 2 billion-euro shortfall for this year that has been exacerbated by a deepening recession.

The fulfillment of Greece’s adjustment program is “more than ever” essential and is a condition for the payment of further aid tranches, Merkel said in the call, according to an e-mailed statement from her chief spokesman, Steffen Seibert.

Papandreou said Sept. 10 that the government’s top priority is “to save the country from bankruptcy” and said he would do whatever is necessary to meet targets.

Putting austerity programs into place “is indispensable to establish sustainable and balanced growth in Greece,” according to the statement issued in Paris. “The success of the Greek plan will provide stability to the euro zone.”

To contact the reporters on this story: Helene Fouquet in Paris at; Eleni Chrepa in Athens at

To contact the editor responsible for this story: James Hertling at


Euro Falls Against Dollar On Greece Concern

By Kristine Aquino and Mariko Ishikawa - Sep 15, 2011 1:02 PM GMT+0700

The euro declined against the dollar on concern that the risk of a Greek default is increasing borrowing costs for other European countries.

The single currency weakened against the yen before Spain and France offer government securities today. The New Zealand dollar fell against its U.S. and Japanese counterparts after the central bank left interest rates unchanged and said that the global economy may slow “sharply.” The U.S. and Japanese currencies rose versus most of their major peers as Asian stocks pared earlier gains.

“It’s difficult to build a fundamental positive outlook for the European currency,” said Jonathan Cavenagh, a Singapore-based strategist at Westpac Banking Corp. “The market is inevitably telling the European authorities that they need to be doing more and we’re just not seeing that action yet.”

The euro fell to $1.3720 as of 6:31 a.m. in London from $1.3755 yesterday in New York. The shared currency weakened to 105.22 yen from 105.39. The dollar was at 76.69 yen from 76.62.

The MSCI Asia Pacific Index of shares advanced 0.8 percent after earlier rallying as much as 1.6 percent.

Spain will today sell as much as 4 billion euros ($5.5 billion) of bonds maturing in 2019 and 2020. France will offer securities maturing in 2013, 2014 and 2016 and is preparing to auction inflation-linked bonds due in 2019 and 2022.

China Bond Purchases

China is willing to buy euro bonds from countries involved in the sovereign debt crisis “within its capacity,” Zhang Xiaoqiang, vice chairman of the country’s National Development and Reform Commission, said today at the World Economic Forum in Dalian. Zhang reiterated comments made yesterday at the event by Premier Wen Jiabao, who said developed nations must first “put their own houses in order,” cut deficits and open markets rather than rely on China to bail out the world economy.

Italy sold 3.9 billion euros of five-year notes on Sept. 13 at an average yield of 5.6 percent, up from 4.93 percent at the auction on July 14. Demand dropped to 1.28 times the amount on offer, from 1.93 times.

Fitch Ratings downgraded five of Spain’s regions including Andalusia and Catalonia yesterday, saying debt levels are surging and the weak economic recovery will undermine revenue. The country’s regional governments are behind schedule to meet deficit targets, according to data released last week that Moody’s Investors Service said was “credit negative.”

‘Risk-Averse Mode’

“Markets seem to still be in quite a risk-averse mode,” Westpac’s Cavenagh said. “The dollar is benefiting from that, so is the yen.”

The yen has appreciated 3.3 percent in the past week, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar, the second best, gained 2 percent.

The yen tends to appreciate during economic and financial turmoil because Japan’s current account surplus makes it less reliant on foreign capital. The dollar benefits as the world’s reserve currency.

Declines in the euro were limited after French President Nicolas Sarkozy and German Chancellor Angela Merkel said in a statement that they are “convinced that the future of Greece is in the euro zone.” The statement from the leaders of Europe’s two biggest economies followed a telephone discussion yesterday with Greek Prime Minister George Papandreou.

Papandreou committed to meet deficit-reduction targets demanded as a condition for an international bailout, according to statements distributed by the governments in Athens, Berlin and Paris.

‘Looking Quite Oversold’

The euro’s 14-day relative strength index versus the yen was at 25.5, below the 30-level that some traders see as a sign an asset’s price may reverse direction after falling too rapidly.

“In the short term, the euro may get a little bit of a bounce,” said Derek Mumford, a Sydney-based director at Rochford Capital, a foreign-exchange and interest-rate risk- management firm. “It’s looking quite oversold.”

New Zealand’s dollar fell against all of its major counterparts after the Reserve Bank held its official cash rate at 2.5 percent and signaled no urgency to raise borrowing costs until the global recovery strengthens.

“The kiwi has moved down as a knee-jerk response to the statement which was a little more dovish than expected,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “The RBNZ has dropped its rates track and is now closer to what swaps markets were pricing. Swaps had already priced in a rather dire global situation.”

The so-called kiwi dollar dropped 1.2 percent to 81.30 U.S. cents. It slid 1.1 percent to 62.35 yen.

To contact the reporters on this story: Kristine Aquino in Singapore at; Mariko Ishikawa in Tokyo at

To contact the editor responsible for this story: Rocky Swift at


European Stocks Extend Gains as ECB Coordinates With Fed to Lend Dollars

By Sarah Jones - Sep 15, 2011 8:05 PM GMT+0700

European stocks extended their advance as the European Central Bank said it will lend the region’s banks dollars to ensure they have enough of the currency through the end of the year.

The benchmark Stoxx Europe 600 Index advanced 2 percent to 228.62 at 2:04 p.m. in London, extending its three-day increase to 4.4 percent. The gauge has still fallen 21 percent from this year’s peak on Feb. 17 as the region’s growing debt crisis and worse-than-forecast U.S. economic reports added to concern that the global recovery is at risk.

To contact the reporter on this story: Sarah Jones in London at

To contact the editor responsible for this story: Andrew Rummer in London at


U.S. Stocks Gain as ECB Offers Loans to Banks in Effort to Tame Crisis

By Rita Nazareth - Sep 15, 2011 8:31 PM GMT+0700

U.S. stocks rose, signaling the Standard & Poor’s 500 Index may gain for a fourth straight day, as a package of dollar loans for European banks assuaged concern spurred by signs unemployment is worsening.

The S&P 500 rose 0.9 percent to 1,199.25 at 9:31 a.m. in New York. The benchmark gauge has gained 3 percent over the last three days.

Stock futures rallied after the ECB said it will lend euro- area banks dollars in three separate three-month loans to ensure they have enough of the U.S. currency through the end of the year. The S&P 500 climbed 1.4 percent yesterday as French President Nicolas Sarkozy and German Chancellor Angela Merkel said they are “convinced” Greece will remain in the euro area.

Equities extended gains today after a report showed industrial production in the U.S. unexpectedly rose in August.

Stock futures trimmed gains earlier as data showed jobless claims climbed by 11,000 to 428,000 in the week ended Sept. 10 that included the Labor Day holiday. Economists surveyed by Bloomberg News projected a drop in claims to 411,000, according to the median forecast.

The Federal Reserve Bank of New York’s general economic index dropped to minus 8.8, the weakest reading since November, from minus 7.7 in August. Economists projected an increase to minus 4, based on the median of 54 forecasts in a Bloomberg News survey. Readings less than zero signal companies in the so- called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are cutting back.

To contact the reporter on this story: Rita Nazareth in New York at

To contact the editor responsible for this story: Nick Baker at


IPhone 5 Rush Orders Seen to Benefit Broadcom

By Adam Satariano - Sep 15, 2011 11:01 AM GMT+0700
Enlarge image IPhone Orders Seen Making Broadcom Top Apple Beneficiary

As overall electronics demand slows, Broadcom and other suppliers for Apple’s iPhone, iPad and iPod Touch may fare better than makers of personal-computer parts.Photographer: Chris Goodney/Bloomberg

Taiwan Semiconductor Manufacturing Co. silicon wafers are arranged for a photograph at the company's headquarters in Hsinchu, Taiwan. The positive reports from Taiwan Semiconductor and Broadcom diverge from others in the chip business. Photographer: Maurice Tsai/Bloomberg

Broadcom Corp. (BRCM) stands out as one of the biggest beneficiaries from orders from Apple Inc. (AAPL), whose need for parts that go into iPhones and iPads represents a bright spot for a semiconductor industry plagued by weak demand.

Taiwan Semiconductor Manufacturing Co., Broadcom’s biggest supplier, last week said third-quarter sales would exceed earlier forecasts because of rush orders from an unnamed customer. Other large Taiwan Semiconductor clients have disclosed disappointing results, suggesting that the customer was probably Broadcom, rushing to meet demand from Apple, according to a supply-chain analysis by Bloomberg.

“Broadcom is the largest link between Apple and Taiwan Semiconductor,” said Richard Davenport, a Bloomberg supply chain analyst, in a report. “Broadcom appears to be a likely candidate for Taiwan Semiconductor’s rush orders.”

As overall electronics demand slows, Broadcom and other suppliers for Apple’s iPhone, iPad and iPod Touch may fare better than makers of personal-computer parts. Broadcom reaffirmed its third-quarter forecast this week, while Texas Instruments Inc. (TXN) and Altera Corp. were among chipmakers that have reduced estimates, citing sluggish economic growth. The contrasting reports highlight how surging sales of Apple gadgets can sweep through the company’s chain of hundreds of suppliers.

“The suppliers of Apple are doing well,” said Michael Burton, an analyst at Kaufman Bros. in New York. “The mobile space is in a very good place.”

IPhone, IPad Sales

Karen Kahn, a spokeswoman for Broadcom, declined to comment, as did Steve Dowling, a spokesman for Cupertino, California-based Apple. Elizabeth Sun, a spokeswoman for Taiwan Semiconductor, also declined to comment, citing the Hsinchu, Taiwan-based company’s policy not to discuss customers and their orders.

Apple may sell 19.5 million phones and 12.5 million iPads in the quarter ending this month, according to Mike Abramsky, an analyst at RBC Capital Markets. That’s up from 14.1 million iPhones and 4.19 million iPads sold in the same period last year.

PC makers and their suppliers are suffering by contrast. Researcher Gartner Inc. last week cut its projection for 2011 PC sales, saying shipments will rise 3.8 percent instead of the 9.3 percent growth it had forecast.

Rush Orders

Rush orders are last-minute purchases intended to make up for dwindling inventory somewhere in the supply chain. Amid the current semiconductor slump, such orders can only be coming from a customer that is big enough to require a manufacturer as large as Taiwan Semiconductor to adjust its resources, Davenport wrote in the report.

“‘Rush orders’ are likely not from a new or unknown product, but rather imply more needed capacity with a mature product offering,” he said.

Anil Doradla, a chip analyst at William Blair & Co., said Taiwan Semiconductor’s order also could also have been made by Qualcomm Inc. (QCOM), which may have a new deal with Apple for iPhone chips.

Kaufman Bros.’ Burton also said Taiwan Semiconductor’s positive news might be related to orders from MediaTek Inc. and Nvidia Corp., which are also customers of Taiwan Semiconductor. Broadcom is less likely because it would have anticipated heavier demand from Apple ahead of the new model of the iPhone or higher sales in China, he said. Davenport also said MediaTek or Qualcomm were possible sources for the rush orders.

Broadcom’s Forecast

Still, Broadcom reiterated its revenue forecast yesterday, encouraging investors who had said that target might be overly optimistic after other chipmakers had warned of disappointing results, Burton said.

Broadcom, based in Irvine, California, made the comments in its announcement of its purchase of NetLogic Microsystems Inc. (NETL), a maker of processors used in data networks, for about $3.7 billion in cash.

The positive reports from Taiwan Semiconductor and Broadcom diverge from others in the chip business. In addition to Altera and Texas Instruments, Fairchild Semiconductor International Inc. told investors its results would be less than earlier forecast.

“Taiwan Semiconductor’s data sticks out like a sore thumb,” Davenport said in an interview. “We are seeing cuts on almost a daily basis.”

Apple, whose sales jumped 52 percent last year, is Broadcom’s largest customer, accounting for about 11 percent of sales, according to data compiled by Bloomberg. Apple’s biggest suppliers include Hon Hai Precision Industry Co., Samsung Electronics Co. and Quanta Computer Inc., according to Bloomberg data.

Expanding in China

Apple is expected to announce a new iPhone by the end of October and will expand its availability in the U.S. to include Sprint Nextel Corp., people familiar with the matter said last week. The company also is expanding in China, where sales grew sixfold last quarter and new retail stores are planned.

Demand from Sprint or carriers in China could result in “an upward revision” to Broadcom’s recently reiterated forecast, Davenport said.

Broadcom rose 55 cents to $34.77 in Nasdaq Stock Market trading yesterday. The company, whose stock has dropped 20 percent this year, may be spared from the struggles of other chipmakers because of Apple.

“Apple could save the quarter for Broadcom,” said William Blair’s Doradla.

To contact the reporter on this story: Adam Satariano in San Francisco at

To contact the editors responsible for this story: Tom Giles at


Record Texas Drought Burning Cotton Farmers as Their ‘White Gold’ Withers

By Elizabeth Campbell - Sep 15, 2011 11:00 AM GMT+0700
Enlarge image Record Texas Drought Burns Cotton Farmers

A plant missed during last year's harvest grows on the edge of a barren cotton field near Hermleigh, Texas. Cotton farmers should see an average of around 90 cents a pound -- if there’s anything to sell. Photo: Scott Olson/Getty Images

The month before cotton reached its highest price ever in March, Brad Heffington bought a 7760 John Deere picker for $500,000 to help get as much “white gold” as he could out of his 6,000 acres in West Texas. Seven months later, the harvester is for sale. The 43-year-old farmer’s crop is wilting; the few plants left are too short for the massive piece of equipment to handle, he says.

At least 65 percent of his crop is gone as drought crushes growers’ chances of benefiting from record prices, Bloomberg Businessweek reports in its Sept. 19 issue.

“It’s going to be the year of wisha, shoulda, coulda,” says Heffington, who has farmed in the biggest cotton patch of the top-exporting country on the planet for 23 seasons. “It’s terrible not to be able to take advantage of these prices.”

Farmers in West Texas are still likely to get the highest spot prices since record-keeping began, according to the Texas AgriLife Extension Service in Lubbock, the unofficial capital of the U.S. cotton industry. They should see an average of around 90 cents a pound -- if there’s anything to sell.

The stretch from October 2010 to August 2011 was the driest 11-month period in Texas since 1895, when the National Weather Service started tracking such things. Governor Rick Perry, a Republican Presidential candidate and son of a cotton farmer, recently asked supporters to pray for rain. The government estimates 33 percent of the U.S. cotton crop will be lost, topping the record of 27 percent in 1933.

‘Unmitigated Disaster’

“It’s an unmitigated disaster,” says Darren Hudson, director of the Cotton Economics Research Institute at Texas Tech University in Lubbock. He says production in West Texas could fall from the 10-year average of about 4.5 million bales to 1.5 million.

The industry, which employs an estimated 38,000 in the state, generates about $6 billion of economic activity in West Texas. This year may slice that amount by 75 percent, Hudson says.

“The people who are really going to be hurt bad are all the service industries,” says Jay Yates, a risk specialist with Texas AgriLife. “Our warehouses are going to be empty. All those forklifts that load cotton won’t be rented.”

Though the disaster could force weaker farms out of business, crop insurance will help growers avoid the devastation wrought by the Dust Bowl, and the exceptionally good year they had in 2010 provides a buffer. The U.S.’s status as the No. 1 exporter of cotton is safe.

“Even at half our crop, we’re still going to export more than Brazil and Australia,” says Hudson. The drought, however, shows no sign of letting up, and people may have to plant less acreage next year. “Two years like this back-to-back would significantly change things,” Yates says.

‘Suicide’ Contracts

Growers now worry about committing to a bale contract, which obligates them to deliver a fixed amount no matter what Mother Nature hands them. Signing a bale contract is “suicide” this year, says Wesley Butchee, who farms 2,400 parched acres south-west of Lubbock. Merchants who buy the cotton are scared of the opposite -- an acre contract, in which farmers promise bales based on how much they produce. That can leave merchants without enough cotton, says Alan Underwood, president of Underwood Cotton Co., a merchant in Lubbock.

Businessmen such as Underwood don’t want to be the next Paul Reinhart Inc. Once one of the biggest U.S. cotton merchants, it filed for bankruptcy in October 2008 after volatility in the futures market triggered margin calls that caused significant losses. These days the furthest out Underwood will contract to sell cotton is 60 days.

Back on Heffington’s farm, he’s left to gather what’s left of his crop. He says a lot of the cotton that survives has smaller bolls, which means the fibers will be shorter, and his production will drop further -- another reason he needs a buyer for his Deere & Co. (DE) picker. He says Australians want such equipment to harvest a record crop of their own.

“I don’t need that machine,” Heffington says. “It’s an investment that’s not going to pay me anything this year.”

To contact the reporter on this story: Elizabeth Campbell in Chicago at

To contact the editor responsible for this story: Flynn McRoberts in Chicago at


HSBC Is Dropped From Lawsuit Alleging Silver Futures, Options Manipulation

By Bob Van Voris - Sep 15, 2011 11:01 AM GMT+0700

HSBC Holdings PLC (HSBA) is no longer a defendant in a lawsuit by investors who claimed the bank and JPMorgan Chase & Co. (JPM) manipulated silver futures and options prices in violation of U.S. antitrust law.

The investors said in consolidated class action complaint filed yesterday that they had signed a tolling agreement with HSBC and weren’t naming the bank as a defendant. Tolling agreements are often used to stop statutes of limitation from running while the parties discuss settlement or dismissal of a claim.

The investors claim that, starting in March 2008, the banks colluded to suppress silver futures so that call options, or the right to buy, would decline, and put options for the right to sell would increase, according to the complaint filed in federal court in Manhattan.

The Commodity Futures Trading Commission began probing allegations of price manipulation in the silver futures market in September 2008.

Investors seek to represent a class of thousands of people and companies that held or traded silver futures and options on June 26, 2007, or from March 17, 2008, to Oct. 27, 2010.

A call to London-based HSBC seeking comment on the matter after regular business hours yesterday wasn’t immediately returned. Joseph Evangelisti, a spokesman for New York-based JPMorgan Chase, declined to comment.

The case is31 In re Commodity Exchange Inc. Silver Futures and Options Trading Litigation, 11-cv-2213, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York at

To contact the editor responsible for this story: Michael Hytha at


UBS Had $2B Loss From Unauthorized Trading; One Arrest

By Elena Logutenkova - Sep 15, 2011 7:06 PM GMT+0700

Enlarge image UBS Has $2 Billion Trading Loss; Man Arrested in London

Pedestrians walk past the London offices of UBS AG at Broadgate, in London on Sept. 15, 2011. Photographer: Simon Dawson/Bloomberg

Sept. 15 (Bloomberg) -- Simon Maughan, head of sales and distribution at MF Global Ltd., discusses UBS AG's $2 billion loss from unauthorized trading at its investment bank. Maughan speaks with Erik Schatzker and Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Sept. 15 (Bloomberg) -- Simon Maughan, head of sales and distribution at MF Global Ltd., discusses UBS AG's $2 billion loss from unauthorized trading at its investment bank. He speaks with Owen Thomas and Maryam Nemazee on Bloomberg Television. (Source: Bloomberg)

UBS AG (UBSN), Switzerland’s biggest bank, said it may be unprofitable in the third quarter after a $2 billion loss from unauthorized trading at its investment bank.

London police arrested Kweku Adoboli, a UBS employee, in connection with the loss, according to a person with knowledge of the matter who declined to be identified. City of London police and UBS declined to identify the man.

UBS management aims to “get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened,” the bank’s group executive board, led by Chief Executive Officer Oswald Gruebel, said in a memo to employees today. “While the news is distressing, it will not change the fundamental strength of our firm.”

The bank tumbled as much as 9.6 percent in Swiss trading following the announcement, which deals a blow to Gruebel’s attempts to rebuild the investment bank after the division recorded 57.1 billion Swiss francs ($65 billion) in cumulative pretax losses in three years through 2009. The trading loss may revive calls for Gruebel to shrink or shut the unit.

“How many times do we have to see huge UBS losses?” said Simon Maughan, head of sales and distribution at MF Global Ltd. in London. “It looks unreformed, unwieldy and ultimately unsustainable. This could be a critical tipping point for UBS’s strategy.”

‘Suspicion of Fraud’

UBS fell 94 centimes, or 8.6 percent, to 9.99 francs by 1:56 p.m. in Zurich, bringing the drop this year to 35 percent. That compares with a 34 percent decline in the 46-company Bloomberg Europe Banks and Financial Services Index.

A man was arrested in central London at 3:30 a.m. on “suspicion of fraud by abuse of position,” the London police said in a statement today. The man remains in custody and an investigation has begun, the police said.

The matter is still under investigation and the “current estimate of the loss on the trades is in the range of $2 billion,” UBS said in a statement today, the third anniversary of the collapse of Lehman Brothers Holdings Inc. No client positions were affected, the company said, declining further comment.

UBS had to raise more than $46 billion in capital from investors, including the Swiss state, to make up for the record losses during the credit crisis. The investment-banking unit had pretax earnings of 1.21 billion francs in the first half of 2011, while UBS as a whole had net income of 2.82 billion francs in the period.

Risk Management

The bank’s tier 1 capital at the end of the second quarter was 37.39 billion francs, giving it a tier 1 capital ratio of 18.1 percent, compared with 14 percent at Deutsche Bank AG, Germany’s biggest bank.

While the loss is “manageable” for UBS, it’s “obviously not helpful for sentiment and confidence in the bank’s risk management following the near-death experience of 2008-2009,” said Andrew Lim, a London-based analyst at Espirito Santo Investment Bank, in a note. Lim had estimated third-quarter net income of 1.1 billion francs for UBS.

UBS last month said it will eliminate about 3,500 jobs, with about 45 percent of the reductions coming from the investment bank, as stricter capital requirements and market turmoil hurt the earnings outlook. The bank in July scrapped the target of doubling pretax profit from last year’s level to 15 billion francs by 2014.

Gruebel, Kengeter

Gruebel, 67, and Carsten Kengeter, 44, who runs the investment bank, have been trying to revive earnings at the division for two years. They hired more than 1,700 people across the investment bank and brought in new business heads to replace those that left or were fired. They’ve also increased risk- taking to improve earnings opportunities.

The investment bank last had a pretax loss in the third quarter of 2010 when what Gruebel called “very low levels of client activity” and a charge related to the bank’s own debt hurt revenue at the division.

Gruebel, who formerly ran Credit Suisse Group AG, was brought out of retirement by UBS in February 2009 to take over from Marcel Rohner after the company posted the biggest annual loss in Swiss corporate history. A former bond trader, Gruebel doubled profit at Credit Suisse between 2004 and 2006.

UBS isn’t alone in suffering from trading losses. Societe Generale (GLE) SA of Paris said in January 2008 that the bank lost 4.9 billion euros ($6.7 billion) after trader Jerome Kerviel took unauthorized positions on European stock index futures.

Credit Suisse, Switzerland’s second-biggest bank, had a loss in the first quarter of 2008 in part because of writedowns on debt securities that were intentionally mispriced by a group of traders. Nick Leeson piled up $1.4 billion of losses that brought down Barings Plc in 1995.

To contact the reporter on this story: Elena Logutenkova in Zurich at

To contact the editor responsible for this story: Frank Connelly at;


Oil Trades Near 2-Day Low on Rising Fuel Stockpiles, European Debt Outlook

By Ben Sharples - Sep 15, 2011 7:25 AM GMT+0700

Oil traded near a two-day low in New York as signals that U.S. fuel demand is weakening countered optimism that European leaders will step up efforts to resolve the region’s sovereign debt crisis.

Futures were little changed after slipping as much as 0.4 percent. Gasoline stockpiles rose 1.94 million barrels last week, the biggest gain since June, according to the Energy Department. Supplies of distillate fuel, a category that includes heating oil and diesel, increased to the highest level since February. Equities and the euro climbed after German and French leaders said they are “convinced” Greece will remain in the single currency.

Crude for October delivery was at $88.80 a barrel, down 11 cents, in electronic trading on the New York Mercantile Exchange at 10:23 a.m. Sydney time. The contract yesterday slid $1.30, or 1.4 percent, to $88.91. Prices are up 17 percent the past year.

Brent oil for October rose 1 cent to $112.41 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract was at a premium of $23.49 to U.S. futures, compared with a record $26.87 on Sept. 6.

U.S. gasoline stockpiles were forecast to fall, according to a Bloomberg News survey of analysts. Consumption of the motor fuel dropped 1.2 percent to 8.85 million barrels a day in the week ended Sept. 9, the lowest since May, the Energy Department report shows.

Angela Merkel and Nicolas Sarkozy, the leaders of Europe’s two biggest economies, issued a statement yesterday following a telephone conversation with Greek Prime Minister George Papandreou. Papandreou committed to meet deficit-reduction targets demanded as a condition for an international bailout, according to statements from governments in Athens, Berlin and Paris.

To contact the reporter on this story: Ben Sharples in Melbourne at

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at


Corn Retreats as Demand For Ethanol Declines, Feedmakers Switch to Wheat

By Luzi Ann Javier - Sep 15, 2011 9:04 AM GMT+0700

Corn retreated on signs that demand from producers of ethanol is declining and on concern makers of livestock feeds may seek cheaper substitutes. Wheat fell.

December-delivery corn lost 0.8 percent to $7.1875 a bushel on the Chicago Board of Trade at 9:48 a.m. Singapore time. The grain climbed 45 percent in the past year, beating a 3.5 percent decline in wheat.

Output of ethanol in the U.S. fell 1.9 percent to 879,000 barrels a day last week, the lowest level since the week ended July 29, according to a Department of Energy report. Feed millers will probably use less corn and more wheat in rations for livestock and poultry feeds, the Department of Agriculture said Sept. 12.

“The market has become increasingly focused on demand destruction in recent weeks,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said in a report today. “Wheat feeding is expected to displace an increasing proportion of corn use.”

Global corn use in animal feeds will drop to 505.1 million metric tons this season from 510 million tons estimated a month earlier, the USDA said Sept. 12.

Wheat for December delivery slipped 0.4 percent to $7.0150 a bushel in Chicago. The grain is trading at a discount to corn for a fifth straight day. Soybeans for November delivery were little changed at $13.83 a bushel.

To contact the reporter on this story: Luzi Ann Javier in Singapore at

To contact the editor responsible for this story: James Poole at


Copper Gains From One-Month Low as Leaders’ Vow Eases Europe Debt Concerns

By Jae Hur - Sep 15, 2011 9:10 AM GMT+0700

Copper rebounded after German and French leaders expressed support for Greece remaining in the euro area, easing concern that Europe’s sovereign-debt crisis may crimp commodity demand. Zinc, tin and lead also gained.

Three-month copper on the London Metal Exchange climbed as much as 0.8 percent to $8,698.50 per metric ton and traded at $8,685 at 11:04 a.m. in Tokyo. The metal touched $8,590 yesterday, the lowest price since Aug. 11.

Angela Merkel and Nicolas Sarkozy, the leaders of Europe’s two biggest economies, issued a statement yesterday after they spoke with Greek Prime Minister George Papandreou by phone. Papandreou committed to meet deficit-reduction targets demanded as a condition for an international bailout, it said.

“All markets were under the influence of Europe’s sovereign-debt crisis, and today we saw some optimism from the overnight news,” said Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. in Seoul. Labor disputes at copper mines in Indonesia and Peru also supported the market, he said.

China is willing to buy the bonds of nations hit by the debt crisis, Caijing reported on its website yesterday, citing Zhang Xiaoqiang, a vice chairman of the National Development and Reform Commission.

Asian stocks advanced today, lifting the region’s benchmark index from a one-year low. The Standard & Poor’s 500 Index rose 1.4 percent yesterday, rounding off a three-day, 3 percent rally. Still, U.S. data today may show industrial production stalled in August, according to a survey of economists by Bloomberg News.

Mine Strikes

Workers at Freeport-McMoRan Copper & Gold Inc. (FCX)’s Peruvian unit failed to reach a wage agreement and will continue a strike that began yesterday, a union official said. Workers and officials at Freeport’s Sociedad Minera Cerro Verde SAA (CVERDEC1) unit, Peru’s third-largest producer, are scheduled to resume talks today, Mining Federation General Secretary Luis Castillo said.

In Indonesia, about 8,000 non-staff workers at Freeport’s Grasberg mine started a one-month strike, Virgo Solossa, head of organizational affairs at a labor union, said yesterday.

Copper for November delivery on the Shanghai Futures Exchange climbed 0.2 percent to 65,150 yuan ($10,199) per ton at 9:29 a.m. local time.

Zinc rose 0.9 percent to $2,180.75 per ton in London, while tin climbed 0.8 percent to $23,580 per ton and lead rose 0.3 percent to $2,350 per ton. Aluminum gained 0.3 percent to $2,365 per ton, and while nickel fell 0.3 percent to $21,303 a ton.

To contact the editor responsible for this story: Richard Dobson at


Freeport Copper Miners in Peru, Indonesia Strike to Support Wage Demands

By Alex Emery, Yoga Rusmana and Eko Listiyorini - Sep 14, 2011 10:13 PM GMT+0700

Freeport-McMoRan Copper & Gold Inc. (FCX)’s copper miners in Peru and Indonesia went on strike today after pay-increase talks broke down, union officials said.

About 1,200 workers at Freeport’s Sociedad Minera Cerro Verde SAA (CVERDEC1) unit, Peru’s third-largest copper producer, walked off their jobs at 8:30 a.m. New York time, Mining Federation General Secretary Luis Castillo said today by telephone. About 8,000 non-staff workers at Freeport’s Grasberg mine in Indonesia started a one-month strike at midnight local time, said Virgo Solossa, head of organizational affairs at the labor union.

Workers in Peru, Chile, Bolivia and Indonesia have gone on strike at copper, gold and zinc mines this year, seeking improved conditions and a bigger slice of record profits. Copper yesterday rose as much as 1.5 percent as threats of mine strikes heightened concern a global shortfall will increase.

“Freeport’s offer was insufficient,” union General Secretary Leoncio Amudio Amudio said yesterday by telephone from Arequipa, 750 kilometers (466 miles) southeast of Lima. “There was no chance of reaching an agreement.”

Freeport fell 71 cents, or 1.7 percent, to $41.29 as of 10:00 a.m. in New York trading. Cerro Verde rose 10 cents, or 0.3 percent, to $39 in Lima yesterday.

Cerro Verde miners held a 48-hour work stoppage last week. Freeport and Grasberg’s labor union ended 38 days of talks over 2011-2013 contract terms on Aug. 26 after failing to agree on wages. Negotiations started after the workers walked off from their jobs for eight days in July.

Copper Shortfall

A strike at Grasberg, located in Mimika, Papua province, 1,940 miles (3,120 kilometers) east of Jakarta, and in Peru could widen a global production shortfall of copper estimated at 670,000 metric tons this year by Barclays Capital and boost prices of the metal in London that have fallen more than 14 percent from a record $10,190 a ton on Feb. 15.

“The management expects the workers to cancel the strike plan and return to the negotiation table because the law gives them room to continue negotiation,” Ramdani Sirait, a Jakarta- based spokesman at Freeport, said in a text-message. He declined to comment on the impact of the strike on production and sales.

The Grasberg workers still expect wages to increase to between $17.50 and $43 an hour from $1.50 to $3.50, Solossa said today. The union cut their expectations from $35 to $200 an hour initially, he said Aug. 26. Freeport offered a compensation package that includes an increase in basic wages for non-staff employees of 22 percent over a two-year period, Sirait said on Sept. 5.

‘No Sincerity’

“We don’t see any sincerity from the company on resolving the pay issue and coming up with a new offer,” Solossa said by telephone today from Timika, the closest town to the mine. “We’ve obtained permits from the regent and chief of police for the strike.”

Workers in Peru are demanding a 9 percent annual wage rise, while Cerro Verde is offering a one-time bonus of 1,200 soles ($705), Amudio said.

Phoenix-based Freeport will continue negotiating a new labor contract, spokesman Eric Kinneberg said on Sept. 8. Cerro Verde, which is studying a $3.5 billion expansion to increase annual copper output by 45 percent, boosted first-half output by 4 percent to 161,246 metric tons.

Grasberg, where operations started in 1990, contains the world’s largest recoverable reserves of copper and the biggest gold reserves, according to Freeport’s website. Copper production at the mine fell to 1.22 billion pounds (553.4 million kilograms) last year from 1.41 billion pounds in 2009, according to the website. Gold output declined to 1.79 million ounces (50,745 kilograms) from 2.57 million ounces.

Copper for three-month delivery declined 1.7 percent to $8,617.75 a metric ton as of 4:13 p.m. local time on the London Metal Exchange.

To contact the reporter on this story: Alex Emery in Lima at

To contact the editor responsible for this story: Dale Crofts at


Crude Declines for a Second Day on U.S. Fuel Supplies, Economic Outlook

By Ben Sharples - Sep 15, 2011 9:34 AM GMT+0700

Oil dropped for a second day in New York as investors bet that increasing U.S. fuel stockpiles and signs of a weakening economy indicate demand will falter in the world’s biggest crude-consuming nation.

Futures declined as much as 0.7 percent after an Energy Department yesterday showed gasoline supplies rose 1.94 million barrels last week, the biggest increase since June. U.S. data today may show industrial production stalled in August, according to a survey of economists by Bloomberg News.

“The impact a weak U.S. economy is going to have on the oil price is probably largely factored in but if the outlook gets gloomier you’ll probably see more response there,” said David Land, head of analysis at CMC Markets Ltd. in Sydney.

Crude for October delivery decreased as much as 59 cents to $88.32 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.68 at 12:29 p.m. Sydney time. The contract yesterday slid $1.30, or 1.4 percent, to $88.91. Prices are 17 percent higher the past year.

Brent oil for October settlement fell 55 cents, or 0.5 percent, to $111.85 a barrel on the London-based ICE Futures Europe exchange. The contract expires today. The more-active November future was down 29 cents at $109.36. Brent was at a premium of $23.26 to U.S. futures, compared with a record close of $26.87 on Sept. 6.

Death Cross

Oil in New York is also declining after a so-called “death cross” formed on the technical chart yesterday, when the 100- day moving average slipped below the 200-day mean, according to data compiled by Bloomberg. Investors tend to sell when a shorter moving average crosses below a longer one.

Societe Generale SA’s global asset allocation team went “underweight” on commodities, saying the asset class is in the “danger zone.” The team recommended that investors position for higher gold prices and lower oil prices in a report distributed yesterday by the Paris-based bank.

U.S. industrial production was probably unchanged last month compared with July, according to the Bloomberg survey before the Federal Reserve report today. That would be the weakest performance since factory output declined in April.

Gasoline stockpiles were forecast to fall, according to a Bloomberg News survey of analysts before yesterday’s Energy Department report. Consumption of the motor fuel dropped 1.2 percent to 8.85 million barrels a day in the week ended Sept. 9, the lowest since May, the report showed. Supplies of distillate fuel, a category that includes heating oil and diesel, increased 1.71 million barrels to 158.5 million, the highest level since February.

Storm Impact

Total crude inventories slid 6.7 million barrels to 346.4 million as Tropical Storm Lee closed platforms in the Gulf of Mexico, which accounts for 27 percent of U.S. supply. As much as 61 percent of production was shut, the Bureau of Ocean Energy Management, Regulation and Enforcement said on its website.

Bermuda’s weather service issued a hurricane watch as Tropical Storm Maria strengthened on a path that will take it west of the island today, according to the National Hurricane Center. Canadian offshore facilities operated by Exxon Mobil Corp., Royal Dutch Shell Plc and Hibernia Management & Development Co. are close to the storm’s projected path.

To contact the reporter on this story: Ben Sharples in Melbourne at

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at


Google Buys 1,023 IBM Patents to Bolster Defense of Android

By Susan Decker and Brian Womack - Sep 15, 2011 3:36 AM GMT+0700

Google Inc. (GOOG) bought 1,023 patents from International Business Machines Corp. (IBM) as the Internet search and advertising company bolsters its strategy of defending against smartphone lawsuits.

Transfers recorded by the U.S. Patent and Trademark Office’s website yesterday show Google acquired the patents Aug. 17. Jim Prosser, a spokesman for the Mountain View, California- based company, confirmed the transaction today without providing details or financial terms. Chris Andrews, a spokesman for Armonk, New York-based IBM, declined to comment.

Google is building an arsenal of patents that the company has said is largely designed to counter a “hostile, organized campaign” by companies including Apple Inc. and Microsoft Corp. against the Android operating system for mobile devices. Google had already acquired 1,030 patents from IBM in a transaction recorded in July, and will obtain more than 17,000 with its $12.5 billion acquisition of Motorola Mobility Holdings Inc.

Android is a free, open-source program that relies on some nonproprietary features Google didn’t create and allows outside developers to modify the code. That has left the company and handset makers that use the system vulnerable to lawsuits claiming Android was built on the backs of research done by other technology companies.

Android handset makers HTC Corp. (2498), Samsung Electronics Co. and Motorola Mobility have each been targeted in lawsuits by Cupertino, California-based Apple, and Microsoft and Motorola Mobility have exchanged patent-infringement allegations.

To help in the fight, Google last month transfered to HTC nine patents it bought in the past year from companies including the former Motorola Inc. and Openwave Systems Inc. Taoyuan, Taiwan-based HTC used those patents last week in a new lawsuit that escalates its patent battle with Apple.

The IBM sale was previously reported by the SEO by the Sea blog.

To contact the reporters on this story: Susan Decker in Washington at; Brian Womack in San Francisco at

To contact the editors responsible for this story: Peter Elstrom at; Allan Holmes at


Obama Approval Plummets to New Low Among Americans Skeptical of Jobs Plan

By Julianna Goldman - Sep 14, 2011 11:01 AM GMT+0700
Enlarge image Obama Approval Plummets on Jobs Plan: Poll

By a margin of 51 percent to 40 percent, Americans doubt the package of tax cuts and spending proposals intended to jumpstart job creation that President Obama submitted to Congress this week will bring down the 9.1 percent jobless rate. Photographer: Andrew Harrer/Bloomberg

Enlarge image U.S. President Barack Obama

U.S. President Barack Obama pauses while making a speech to a joint session of Congress at the Capitol in Washington, D.C., U.S., on Thursday, Sept. 8, 2011. Obama called on Congress to pass a jobs plan that would inject $447 billion into the economy through infrastructure spending, subsidies to local governments to stem teacher layoffs, and cutting in half the payroll taxes paid by workers and small-business owners. Photographer: Kevin Lamarque/Pool via Bloomberg

Sept. 14 (Bloomberg) -- Matthew Dowd, former chief campaign strategist for George W. Bush, discusses President Barack Obama’s approval rating and the president's $447 billion jobs proposal. Dowd speaks with Deirdre Bolton, Erik Schatzker, Juliana Goldman and Michael McKee on Bloomberg Television's "InsideTrack." (Dowd is a Bloomberg Television political analyst. The opinions expressed are his own. Source: Bloomberg)

Sept. 14 (Bloomberg) -- Al Hunt, executive editor at Bloomberg News, talks about a Bloomberg National Poll on President Barack Obama's job approval rating. A majority of Americans don’t believe the president's $447 billion jobs plan will help lower the unemployment rate, and Americans disapprove of his handling of the economy by 62 percent to 33 percent, the poll conducted Sept. 9-12 shows. Hunt speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)

Sept. 14 (Bloomberg) -- Joel Prakken, chairman of Macroeconomic Advisers LLC, talks about President Barack Obama's $447 billion jobs proposal. Prakken speaks with Deirdre Bolton and Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

A majority of Americans don’t believe President Barack Obama’s $447 billion jobs plan will help lower the unemployment rate, skepticism he must overcome as he presses Congress for action and positions himself for re- election.

The downbeat assessment of the American Jobs Act reflects a growing and broad sense of dissatisfaction with the president. Americans disapprove of his handling of the economy by 62 percent to 33 percent, a Bloomberg National Poll conducted Sept. 9-12 shows. The disapproval number represents a nine point increase from six months ago.

The president’s job approval rating also stands at the lowest of his presidency -- 45 percent. That rating is driven down in part by a majority of independents, 53 percent, who disapprove of his performance.

“I don’t think he’s done as good a job as I think he could have,” said Paul Kaplan, 58, an unemployed Democrat from Philadelphia. “We were hopeful that things would improve in the economy and they’ve only gotten worse. People in Washington just don’t seem to want to cooperate with each other and work for the people.”

The poll hands Obama new lows in each of the categories that measures his performance on the economy: only 36 percent of respondents approve of his efforts to create jobs, 30 percent approve of how he’s tackled the budget deficit and 39 percent approve of his handling of health care.

Jobs Bill Skepticism

By a margin of 51 percent to 40 percent, Americans doubt the package of tax cuts and spending proposals intended to jumpstart job creation that Obama submitted to Congress this week will bring down the 9.1 percent jobless rate. That sentiment undermines one of the core arguments the president is making on the job act’s behalf in a nationwide campaign to build public support.

Compounding Obama’s challenge is that 56 percent of independents, whom the president won in 2008 and will need to win in 2012, are skeptical it will work.

“I think the jobs bill is a good start, but it’s hard to look at it real positively in light of what’s just happened with the budget,” said Jason Dumas, a 40 year-old independent voter from Charlotte, North Carolina. “The partisanship is still there and it seems like we’re gearing up more for the election.”

In all of the categories gauging Obama’s performance on economic issues, the president’s disapproval rating among independents is above 50 percent.

Independents’ Disapproval

On the economy, 29 percent of independents approve of the job Obama is doing while 66 percent disapprove. Obama is weakest among independents when it comes to his ability to reduce the deficit -- under a quarter of those respondents approve of his job in that category, while 67 percent disapprove. On job creation, 30 percent of independents approve of Obama’s efforts while 63 percent disapprove. He scored slightly better among independents on health care with 34 percent approving and 57 percent disapproving.

Forty-six percent of independents say they definitely won’t vote to re-elect the president, compared to 21 percent who definitely will support him. In 2008, Obama was backed by 52 percent of independent voters, compared to 44 percent who backed Republican nominee John McCain, an Arizona senator, according to exit polls.

In addition to lost ground with independents, Obama’s 2008 supporters are less enthused in the wake of the summer’s fight to raise the debt ceiling and avoid a default, according to the poll of 997 adults conducted by Selzer & Co., based in Des Moines, Iowa.

Core Support Decline

Of the respondents who said they’ve supported Obama at one point since he launched his presidential campaign in 2007, fewer than half say they still support him as fervently. Thirty- seven percent say their support has waned and 19 percent say he lost their backing because they’ve grown disappointed or angry with his leadership.

Almost a third of Democrats and Democratic-leaning respondents say they’d like to see Obama face a primary challenge.

The job performance areas where Obama scores favorably are his handling of the situation in Libya and fighting terrorism. Another rare bright spot in the poll is his favorability rating, which stands at 50 percent and is better than all of his prospective Republican rivals. House Speaker John Boehner, an Ohio Republican, has a favorability rating of 33 percent compared to 38 percent who view him unfavorably, a ten point jump from June before the debt ceiling standoff in August.

Unfavorability Rating

Even that ray of hope is a dim one. Obama’s unfavorability rating is 47 percent, just three percentage points below his favorability, which is within the poll’s margin of error of plus or minus 3.1 percentage points.

“I personally don’t think it’s his fault, I think it’s Congress,” said Krystal Carter, 40, a Democrat, who is an esthetician in Davenport, Florida. “They’re like a bunch of kindergarteners. I think we just need to vote all them out and start over.”

As Obama urges Congress to act on the jobs bill and prepares to engage in debate over a $1.5 trillion to $2 trillion debt-reduction plan, Americans give him low marks on his negotiating style. By a margin of 52 percent to 37 percent, they disapprove of how Obama negotiates with the Republican majority in the House of Representatives. Fifty-eight percent of Democrats approve of Obama’s negotiating skills, while 71 percent of Republicans disapprove. Among independents, 55 percent are critical of his skills.

Stand for Something

“If he believes in something, then he needs to stand for it,” said Dumas, the North Carolina independent who works in video production. “He needs to back it and not play both sides. It hasn’t really served him well.”

Obama has pledged to stand firm on the jobs program. “This isn’t about giving Democrats or Republicans a win. It’s about giving the American people a win,” he said at a jobs event in Columbus, Ohio, yesterday.

While respondents are skeptical that the program will reduce the unemployment rate, the poll found support for some of its components.

The plan’s call for approximately $35 billion in direct aid to state and local governments to stem layoffs of educators and emergency personnel is favored by 71 percent of Americans compared to 27 percent who oppose it. While the proposal was the most popular in the poll, it is also the least likely to pass Congress because Republicans have expressed opposition to new spending.

Tax Centerpiece

The centerpiece of the proposal -- and the plank that Republicans have said they are most willing to consider -- is a cut in payroll taxes, which cover the first $106,800 in earnings and are evenly split between employers and employees.

Respondents are evenly split at 45 percent on this approach, which would cost $240 billion to the U.S. Treasury. Independents oppose it 47 percent versus 43 percent who favor it.

The White House also would use temporary payroll tax reductions next year to offer incentives for new hiring and to assist small businesses -- something Kaplan, a Democratic Party official in Philadelphia, said would help him.

“I hope it gets passed quickly, I’m one of the people who might benefit from it directly,” he said. “I myself have been out of work for six months now. I haven’t even had an interview.”

Others are less optimistic. Since World War II, no U.S. president has won re-election with a jobless rate above 6 percent, with the exception of Ronald Reagan, who faced 7.2 percent unemployment on Election Day in 1984.

“He can promise the moon,” said Carter. “But if Congress can’t get their act together and vote to pass it, it’s never going to happen.”

To contact the reporter on this story: Julianna Goldman in Washington at

To contact the editor responsible for this story: Mark Silva in Washington at


Stocks, Euro Extend Advance as Germany, France Confirm Support for Greece

By Michael P. Regan and Rita Nazareth - Sep 15, 2011 6:24 AM GMT+0700

Enlarge image Stocks, Euro Gain on Europe Debt Optimism

Frank T. Masiello of Barclays Capital, left, works at the New York Stock Exchange on Sept. 14, 2011. Photographer: Scott Eells/Bloomberg

Sept. 14 (Bloomberg) -- Axel Merk, president and chief investment officer at Merk Investments LLC in Palo Alto, California, talks about global currencies, Europe's sovereign-debt crisis, and monetary policies of the European Central Bank and the Federal Reserve. Merk speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Sept. 14 (Bloomberg) -- Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, talks about global financial markets. Halmarick, speaking with Susan Li on Bloomberg Television's "First Up," also discusses Europe's sovereign debt crisis. (Source: Bloomberg)

Sept. 14 (Bloomberg) -- Krishna Memani, director of fixed income at OppenheimerFunds Inc., discusses Moody’s Investors Service cutting the long-term credit ratings of Credit Agricole SA and Societe Generale SA by one level. Moody’s put the companies, along with BNP Paribas SA, on review for a possible downgrade on June 15, citing the risks posed by their investments in Greece. Memani speaks with Deirdre Bolton and Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Sept. 14 (Bloomberg) -- Vincent Truglia, managing director at Granite Springs Asset Management, talks about Europe's sovereign debt crisis and the implications if Italy defaults on its debt. Truglia also discusses the likelihood that Greece will default on its obligations. He speaks with Lisa Murphy on Bloomberg Television's "Fast Forward." (Source: Bloomberg)

U.S. stocks and the euro extended gains as French President Nicolas Sarkozy and German Chancellor Angela Merkel said they’re convinced Greece will remain in the euro area, according to a statement issued by Sarkozy after they spoke to Greek Prime Minister George Papandreou by telephone. Photographer: Scott Eells/Bloomberg

Financial traders monitor computer screens at their desks inside the Frankfurt Stock Exchange in Frankfurt. Photographer: Hannelore Foerster/Bloomberg

Stocks rallied, sending the Standard & Poor’s 500 Index higher for a third day, and the euro extended gains as German and French leaders expressed support for Greece to remain in the euro monetary union and speculation grew that China may help Europe’s most-indebted nations.

The S&P 500 gained 1.4 percent to close at 1,188.68, while its December futures slid less than 0.1 percent as of 7:21 p.m. in New York. The Stoxx Europe 600 Index added 1.5 percent. The euro rose 0.6 percent to $1.3755. Ten-year Treasury yields fell one basis point to 1.98 percent. Oil futures fell 1.4 percent to $88.91 a barrel after an increase in fuel inventories and crude helped lead the S&P GSCI Index of commodities down 0.6 percent.

U.S. stocks and the euro extended gains as French President Nicolas Sarkozy and German Chancellor Angela Merkel said they’re convinced Greece will remain in the euro area, according to a statement issued by Sarkozy after they spoke to Greek Prime Minister George Papandreou by telephone. Italian and Spanish debt rose as Zhang Xiaoqiang, a vice chairman of the National Development and Reform Commission, said China is willing to buy bonds of nations hit by the debt crisis.

“It’s a relief rally,” John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $250 billion. “Over the last few days, there had been speculation that Germany was about to pull the plug and abandon the effort to keep Greece solvent and funded. Stocks have been beaten up and there are bargains. On the slightest bit of potentially good news, people tend to come in and scoop up some of those bargains.”

Plunge Erased

The S&P 500 climbed to the highest level since Sept. 7, with the three-day rally erasing a 2.7 percent slide on Sept. 9 that was triggered by reports Germany was preparing to shore up banks in the event of a Greek default.

Industrial, consumer-discretionary and technology companies climbed at least 1.6 percent collectively to lead gains among all 10 of the main industry groups in the S&P 500. General Electric Co., Home Depot Inc. and Walt Disney Co. rose at least 2.5 percent for the biggest gains in the Dow Jones Industrial Average, which surged 140.88 points, or 1.3 percent, to 11,246.73. Yahoo! Inc. climbed 2.1 percent as investor Third Point LLC ramped up pressure on the company’s board, saying it may add to its 5.2 percent stake and the All Things D blog reported that potential buyers were preparing bids for the company.

Greece’s Papandreou today committed to meet deficit- reduction targets demanded as a condition for an international bailout, according to statements distributed by Athens and Paris. Sarkozy and Merkel “are convinced that the future of Greece is in the euro zone,” the French statement said, easing concern that the monetary union may fall apart. European equity markets closed before the statement was released.

Austria Vote

The S&P 500 briefly erased gains and European stocks trimmed their advance earlier as Austria’s finance ministry said a parliamentary vote on an overhaul of the European Financial Stability Facility bailout fund will be delayed. The parliament’s finance committee rejected adding the item to the agenda of a meeting today.

China is willing to offer assistance, NDRC’s Zhang said without elaborating, adding that Premier Wen Jiabao made similar remarks earlier, according to a transcript distributed on the planning agency’s website yesterday evening. Caijing magazine attended the briefing and published an article earlier.

U.S. stocks rose even after the Commerce Department said retail sales were unchanged in August, following a 0.3 percent gain for July that was smaller than previously estimated. The median forecast of 83 economists surveyed by Bloomberg News was a 0.2 percent rise. Another report from the Commerce Department showed inventories rose a less-than-forecast 0.4 percent in July, indicating companies are bracing for a slowdown in demand.

Credit Risk

A gauge of U.S. corporate credit risk declined for a second day from a two-year high. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 2.1 basis points to a mid-price of 129 basis points, according to index administrator Markit Group Ltd.

Concern the global economy will slip back into a recession amid a worsening sovereign-debt crisis triggered an 18 percent plunge in the S&P 500 between the end of April and Aug. 8. The index has rebounded 6.2 percent since. The Stoxx 600 climbed 2.4 percent in two days after reaching a two-year low at the beginning of the week. Developing nation equities entered a bear market yesterday, with the MSCI Emerging Markets Index extending its loss from its high for the year to 20 percent and slipping another 1.2 percent today.

U.S. Pessimism

Pessimism about the economy has deepened and confidence in both U.S. political parties has fallen, with only 20 percent saying the country is on the right course. As little as 9 percent of Americans say they are confident the economy won’t slide into a recession, according to a Bloomberg National Poll.

Ten-year Treasury yields reached an all-time low of 1.877 percent on Sept. 12 and gold futures rallied to a record $1,923.70 an ounce on Sept. 6 as investors pursued assets considered to be the most safe. Gold for December delivery lost 0.2 percent to $1,826.50 today.

Treasury 30-year bonds rose today after the U.S. sold $13 billion of the securities at a record low yield of 3.31 percent amid bets the Federal Reserve will buy more bonds. The auction was the last of three sales totaling $66 billion this week. Existing 30-year bond yields lost six basis points to 3.27 percent.

Driving the Markets

“At the end of the day, Europe is still driving these markets for the foreseeable future,” said Justin Lederer, an interest-rate strategist at primary dealer Cantor Fitzgerald LP in New York. “We might see small moves, but the European problems have underscored these low rates.”

Almost six shares advanced for each that declined in the Stoxx 600. Next Plc rallied 6.3 percent as the U.K.’s second- largest clothing retailer reported a gain in first-half earnings and said next year may not be as challenging for the industry.

Societe Generale SA, France’s third-largest bank by assets, fell 2.9 percent after Moody’s Investors Service cut its long- term debt rating by one level. BNP Paribas (BNP) SA, which was kept on review for a possible cut, lost 3.9 percent.

Oil, Gasoline

Crude oil declined after the U.S. government reported that fuel inventories climbed, demand dropped and retail sales stalled in the world’s biggest oil-consuming country. Futures decreased as much as 2.2 percent after the Energy Department said gasoline supplies rose 1.94 million barrels last week, the biggest gain since June. Fuel use fell 3.8 percent. Gasoline for October delivery lost 0.6 percent to $2.7258 a gallon on the New York Mercantile Exchange.

Societe Generale went “underweight” on commodities, saying the asset class is “in the danger zone.”

“Prices of cyclically sensitive commodity prices, such as crude oil and copper, have held up well over recent weeks despite the recent deceleration in economic activity, and we believe that this should contribute to a meaningful drop,” the French bank said in its cross-asset research report. Societe Generale (GLE) is recommending investors position for higher gold prices and lower oil prices.

To contact the reporters on this story: Michael P. Regan in New York at; Rita Nazareth in New York at

To contact the editor responsible for this story: Nick Baker at


Black Swan Funds Said to Soar Amid Europe Crisis

By Shannon D. Harrington and Saijel Kishan - Sep 15, 2011 2:04 AM GMT+0700

Enlarge image Par6502157

Clashes broke out between police and demonstrators today as thousands took to the streets of Greece's second city of Thessaloniki in a mass protest against austerity measures. Photographer: Sakis Mitrolidis/AFP/Getty Images

Hedge funds created to protect investors against market shocks in the wake of the biggest recession in seven decades are soaring as Europe’s intensifying debt crisis infects markets globally.

Saba Capital Management LP’s $550 million so-called tail risk fund has gained 11.5 percent in September after increasing 15 percent last month, according to a person with knowledge of its performance. Pine River Capital Management LP’s $160 million tail fund advanced 14.5 percent in August, an investor familiar with the returns said. They asked not to be identified because the results are private.

Hedge funds have lost 4.8 percent since July 30 on growing concern that Europe’s leaders will fail to stem a crisis of confidence that has sent borrowing costs of nations from Greece to Italy to euro-era records. Saba, founded by former Deutsche Bank AG credit trader Boaz Weinstein, gained as junk bonds had their biggest monthly losses since the months after Lehman Brothers Holdings Inc.’s bankruptcy in 2008.

“The tail fund benefited from our focus on credit because equity just hasn’t moved as much proportionally,” Weinstein said. “This is not altogether surprising considering the level of fear and uncertainty related to sovereign and bank solvency.”

Weinstein declined to comment on his fund’s specific returns. Patrick Clifford, a spokesman for Minnetonka, Minnesota-based Pine River, also declined comment.

Black Swans

Tail funds derive their name from the outlying points, or tails, on bell-shaped curves that forecasters use to plot the probability of losses or gains in a given market.

Hedging against improbable events was pioneered in the 1980s by traders including Nassim Nicholas Taleb, whose 2007 book, “The Black Swan,” warned that bankers relying too much on probability models had become blind to potential catastrophes.

Taleb consults with Universa Investments LP, a hedge fund founded and owned by Mark Spitznagel that seeks to protect clients against black-swan events, a reference to the widely held belief that only white swans existed, until black ones were discovered in Australia in 1697.

Pine River formed its fund in June 2010 at the request of investors who wanted access to the techniques used by its primary multi-strategy fund, which gained 40 percent during 2008 and 2009. Saba started its version in November.

Capula, Gramercy

Other firms running the strategy include Capula Investment Management, which began a fund in March 2010 that’s grown to $2 billion. It climbed more than 5 percent this month after a 5.36 percent gain in August, according to an investor familiar with the performance. The fund has risen about 11 percent this year.

A tail risk fund managed by Gramercy, a Greenwich, Connecticut-based investment firm that oversees more than $2 billion, gained 9.8 percent in September and is up 29 percent since its May 1 inception, according to a person familiar with the fund’s returns.

The managers profited as the VIX index, a measure of stock- market volatility known as Wall Street’s “fear gauge,” more than doubled in the past two months.

A measure of price swings over a 30-day period for the Markit CDX North America Investment Grade Index, a credit- default swaps benchmark used to hedge against losses, tripled since May, reaching the highest in 14 months, prices from Markit Group Ltd. show.

The index, which rises as investor confidence deteriorates, soared to 135.9 basis points on Sept. 12, the highest level in more than two years, from 91.9 at the end of June.

Junk Bonds

Company bonds rated below BBB- by Standard & Poor’s and lower than Baa3 by Moody’s Investors Service lost 4 percent in August, the biggest loss since November 2008, according to Bank of America Merrill Lynch index data. The S&P 500 Index (SPX) decreased 5.4 percent last month, including reinvested dividends, and has dropped 10.7 percent since the end of June through yesterday.

Hedge funds globally declined 4.8 percent in the seven weeks ended Sept. 12, according to a Hedge Fund Research Inc. index of preliminary data that tracks 40 firms. A broader gauge of the Chicago-based research firm fell 2.3 percent in August, the worst month since May 2010.

Billionaire investor John Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies, lost 15 percent in August, two people familiar with the firm said last week. The rout extended the fund’s loss this year to 34 percent for Paulson, who has been betting on an economic recovery by the end of 2012.

BlueMountain, PAMLI

Some credit strategies that seek to avoid big bets on the direction of the economy, known as long/short funds, gained or outperformed the market last month, including New York-based Saba’s flagship $3.65 billion fund, which rose 2.5 percent, a person familiar with the fund said last week.

BlueMountain Capital Management’s Credit Alternatives Fund, which seeks to profit from dislocations between bonds, loans and derivatives, fell 1.89 percent in August, leaving its gains for the year at 3.06 percent, according to a note to investors. A spokeswoman for the firm declined to comment.

PAMLI Capital Management LLC’s $115 million PAMLI Global Credit Strategies fund gained 5.02 percent, according to a person familiar with the fund’s performance. The firm was founded in January by former Highbridge Capital Management LLC portfolio manager Faisal Syed.

To contact the reporters on this story: Shannon D. Harrington in New York at; Saijel Kishan in New York at

To contact the editors responsible for this story: Alan Goldstein at; Christian Baumgaertel at