U.K. May Face Derivatives-Law Setback in EU

By Jim Brunsden - Dec 16, 2011 10:10 PM GMT+0700

European Union officials may abandon U.K.-backed safeguards on derivatives legislation, four people familiar with the situation said, a week after Prime Minister David Cameron’s demands to protect London’s financial industry almost wrecked an EU summit.

Ambassadors for the EU’s 27 nations, meeting yesterday in Brussels, discussed weakening an October agreement to grant national regulators powers over clearinghouses, according to the people, who couldn’t be identified because the talks are private. The British government has argued that the accord is essential to protect U.K.-based clearing firms from pressure to move part of their business to the euro area.

The possible unraveling of the derivatives deal follows Cameron’s decision to break ranks with French President Nicolas Sarkozy and German Chancellor Angela Merkel at an EU summit last week. The U.K. leader refused to join the 26 other nations in backing a new treaty for the bloc after he failed to secure safeguards that would have stopped EU plans to police financial services in London, Europe’s trading hub.

This “acts as a strong reminder that exercising the U.K. veto last week does little to strengthen the British hand on a range of issues of great importance to the U.K. financial system,” Richard Reid, research director for the International Centre for Financial Regulation, said in an e-mail.

ECB Lawsuit

The U.K. has sued the European Central Bank over its plans to prevent trades in some euro-denominated securities from being cleared outside of the 17 countries that share the currency. Britain also sought to thwart the ECB stance by seeking safeguards in the draft derivatives legislation.

National officials met today for further discussions on whether to change the October agreement, Kacper Chmielewski, a spokesman for Poland’s EU presidency, said in an e-mail. He declined to comment on the outcome of the meeting.

Polish officials and parliament lawmakers will meet on Dec. 19 to try and reach a deal on the draft law.

Lawmakers in the European Parliament “demanded” that the October compromise be reconsidered, according to an EU document dated Dec. 14 and obtained by Bloomberg News. The Parliament and national governments must agree on the law before it can be implemented.

Michel Barnier, the EU’s financial-services chief, has said that the U.K. demands at the summit would have granted the country an unacceptable opt-out from European rules.

Chantal Hughes, Barnier’s spokeswoman, declined to immediately comment and the U.K. government’s office in Brussels declined to comment.

‘Early Indication’

Losing protection for its derivatives industry would be “a very early indication of the potential damage done to the U.K.’s interests on a broad front of financial regulation driven from Brussels,” Reid said.

France’s market regulator, the AMF, today rejected any special treatment for the U.K. on the application of EU financial rules.

“In market regulations, it is clear we can’t have two sets of rules for one market,” Thierry Francq, the AMF’s secretary general told reporters in Paris. “It makes no sense.”

The EU Parliament “has always been strongly in favor of as much power as possible being vested in centralized EU institutions, and this issue was always going to face a rough ride there,” Simon Gleeson, a financial-services lawyer at Clifford Chance LLP in London, said in an e-mail.

It’s doubtful that national governments “will be prepared to move on this point,” Gleeson said, “since they will be concerned about taxpayer liabilities,” should a clearinghouse fail.

Clearinghouses such as LCH.Clearnet Group Ltd. and Deutsche Boerse AG (DB1)’s Eurex Clearing operate as central counterparties for every buy and sell order executed by their members, who post collateral, reducing the threat from a trader’s default.

To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net;

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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Consumer Prices in U.S. Stagnate as Gas Drops

By Bob Willis - Dec 16, 2011 10:06 PM GMT+0700

The cost of living in the U.S. was little changed in November as gasoline prices dropped and food expenses cooled, supporting the Federal Reserve’s view that inflation will remain in check.

The stable reading for the consumer-price index followed a 0.1 percent decline in October, a report from the Labor Department showed today in Washington. So-called core prices that exclude food and energy rose 0.2 percent, more than forecast, reflecting higher medical care and clothing costs.

Companies like Target Corp. and J.C. Penney Co. are stepping up promotions during the holiday season to lure customers facing 8.6 percent unemployment and stagnant wages, signaling any price increases will be limited. More stable inflation gives Fed policy makers leeway to take additional steps to boost growth should the world’s largest economy falter.

“Retailers will be inclined to do more discounting,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York, who projected prices would be unchanged. “Inflation will crest around here. This will give the Fed more comfort in terms of implementing further monetary policy.”

Stocks rose on optimism the European Union will meet a Dec. 19 deadline for funding a crisis-fighting package. The Standard & Poor’s 500 Index climbed 1 percent to 1,228.25 at 10:05 a.m. in New York.

Euro-Area Exports

Euro-area exports fell 1.9 percent in October, led by declines in Germany and Spain, data today showed, as the region’s economy slid toward a recession. European car sales fell in November by the most in five months, the Brussels-based European Automobile Manufacturers Association said. Ireland’s economy shrank 1.9 percent in the third quarter, the most in more than two years, according to separate figures.

With the fallout from Europe’s debt crisis threatening growth and inflation cooling, the Reserve Bank of India left the repurchase rate at 8.5 percent. The decision was projected by all 14 analysts in a Bloomberg News survey.

The median forecast of 82 economists surveyed by Bloomberg projected a 0.1 percent increase in consumer prices. Estimates ranged from a decline of 0.1 percent to a 0.4 percent gain. Economists projected a 0.1 percent gain in core prices, according to the survey median.

Overall consumer prices increased 3.4 percent in the 12 months ended November, the smallest year-over-year increase since April. The core CPI climbed 2.2 percent from November 2010, the most since October 2008.

Fed’s Gauge

The Fed’s preferred price gauge, the Commerce Department’s measure that excludes food and fuel and is tied to consumer spending, rose 0.1 percent in October after no change the prior month. It was up 1.7 percent in the year ended in October, at the lower end of Fed policy makers’ long-run projection of 1.7 percent to 2 percent.

“Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable,” Fed policy makers said in a Dec. 13 statement after their most recent monetary policy meeting.

Today’s report showed energy costs in November decreased 1.6 percent from a month earlier, reflecting a 2.4 percent drop in gasoline prices. Energy costs were up 12 percent from November 2010.

The average price of a gallon of regular gasoline at the pump fell to $3.38 last month from $3.43 in October, according to data from AAA, the country’s biggest auto group.

Fuel Costs

Fuel costs may keep declining as the European debt crisis threatens to slow global growth. The average gasoline price dropped to $3.26 a gallon on Dec. 14, the lowest since February.

“Weakness in energy will become more obvious in coming months,” said Eric Green, chief market economist at TD Securities Inc. in New York. “The story will be core inflation holding around these levels while headline moves lower, and that frees up the Fed to become more proactive as necessary.”

The cost of food in November climbed 0.1 percent, restrained by the first decrease in a year in the food-at-home category. Clothing prices advanced 0.6 percent, the seventh gain in the past eight months, today’s report showed. Expenses for medical care increased 0.4 percent after a 0.5 percent gain the prior month.

Retailers are relying on a range of marketing ploys to keep consumers spending through Christmas. Cyber Monday came twice this year at J.C. Penney Co. and Sears Holdings Corp. -- once on the day after Thanksgiving weekend and again a week later.

Target Corp. (TGT) began a three-day “Almost Last Minute Sale” on Dec. 8 with markdowns on such items as Stanley Black & Decker Inc. coffee makers and gift card giveaways. A week earlier, the discount chain held the “Big Toy Event” on Dec. 1 offering half off a second item.

Rents Cool

Today’s report also showed owners-equivalent rent, one of the categories designed to track rental prices, climbed 0.1 percent after a 0.2 percent gain in October.

Paychecks are failing to keep up with even limited inflation. Hourly earnings adjusted for inflation fell 0.1 percent in November, and were down 1.5 percent over the past 12 months.

A Labor Department report yesterday showed prices paid to wholesalers excluding food and fuel rose 0.1 percent in November, less than forecast, while all producer prices rose 0.3 percent, paced by a gain in food expenses.

Import prices in the U.S., reported Dec. 14, rose 0.7 percent.

The CPI is the broadest of the three monthly price measures from the Labor Department because it includes goods and services. About 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Fed’s Dudley Says Europe Doesn’t Face Fiscal Insolvency Over Debt Crisis

By Caroline Salas Gage - Dec 16, 2011 10:23 PM GMT+0700

Federal Reserve Bank of New York President William C. Dudley said Europe has the “fiscal capacity” to solve its issues and that its problem is “really a political one.”

“I do not see Europe as having a fiscal insolvency problem,” Dudley, 58, said at a hearing of a House Oversight and Government Reform subcommittee in Washington. “Their situation fiscally is very comparable to ours” and that of other nations.

Dudley said some European banks face “greater difficulty” than others, and that the stress tests being undertaken by regulators are “a very important step” in bolstering confidence in the financial system.

“You really have to solve two problems,” Dudley said. Regulators need to “make sure the banks have enough capital,” and “you also have to get each country on a sustainable fiscal path so that people are comfortable that the sovereign debt they hold is going to be money good.”

To contact the reporter on this story: Caroline Salas Gage in New York at csalas1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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Gold Rout Means Traders Least Bullish

By Nicholas Larkin - Dec 16, 2011 8:21 PM GMT+0700

Gold’s biggest rout in three months means traders are the least bullish since July and Dennis Gartman, the economist who sold the last of his metal on the day the slump began, warned of further declines.

Ten of 21 surveyed by Bloomberg expect the metal to gain next week, the lowest proportion since July 29. Three were neutral. While bullion’s slide of as much as 9 percent this week took its drop from the record $1,923.70 an ounce reached in September to almost 20 percent, the common definition of a bear market, investors are still holding near the most metal ever in exchange-traded products, a wager now valued at $120.6 billion.

Commodities retreated the most in almost three months and more than $640 billion was wiped off the value of global equities on Dec. 14 after the Federal Reserve refrained from taking new stimulus measures. That combined with signs of increased funding stress in Europe helped drive the dollar to the highest since January against the euro. Gold typically moves in the opposite direction to the U.S. currency.

“Bears are in the driver seat,” said Miguel Perez- Santalla, vice president of sales at Heraeus Precious Metals Management LLC in New York, whose clients include jewelers and mining companies. (BWMING) “But the problems in Europe have not been solved and buying will come back and we will see higher prices because of a lack of confidence in the financial system.”

Bank of America

Bullion rose 12 percent to $1,598.30 an ounce this year on the Comex in New York. Even after this week’s rout, it’s still the third-best performer in the Standard & Poor’s GSCI gauge of 24 commodities, which fell 1.7 percent. The MSCI All-Country World Index of equities retreated 12 percent this year and Treasuries returned 9.6 percent, a Bank of America Corp. index shows.

Options traders are still bullish. The most widely held option gives owners the right to buy gold at $2,000 by March, data from the bourse show. The eight biggest holdings are all call options at 13 percent or more above prices today.

While investors cut 13.3 metric tons of gold from their ETP holdings yesterday, the most since Aug. 24, assets are less than 1 percent below the record set Dec. 14, data compiled by Bloomberg show. Holders have a combined 2,347.5 tons, greater than the reserves of all but four of the world’s central banks and equal to more than 10 months of global mine supply.

Debt Crisis

Demand for physical gold accelerated this quarter at the fastest pace in more than a year as Europe’s debt crisis deepened. The European Central Bank cut interest rates for a second consecutive month last week to shore up growth. Lower interest rates increases the appeal of gold because it generally earns investors returns only through price gains.

“The fundamentals remain positive,” said Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland. “Both the European Central Bank and Fed remain easy. After this cleansing, gold will move up again.”

Gartman said on Dec. 13 traders were witnessing the “death of a bull” and “the beginnings of a real bear market” that may drive prices as low as $1,475. Bullion may “cascade” lower if prices drop below yesterday’s lows by early next week, he wrote today in his Suffolk, Virginia-based Gartman Letter. If that were to happen, he would “begin to look again at buying gold,” he wrote.

While gold is heading for an 11th consecutive annual gain, this week’s declines mean it is also poised for its first quarterly drop in three years.

Money Managers

Hedge funds and other money managers boosted bets on higher futures prices by 3.5 percent to 151,347 contracts in the week ended Dec. 6, the first gain in three weeks, U.S. Commodity Futures Trading Commission data show. Prices declined 4 percent in the week through Dec. 13 and dropped another 5.6 percent since then. The CFTC will announce the latest data today.

Gold may drop below $1,500 an ounce in the “short term,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, who is forecasting an average of $1,800 next year. “Gold is not a safe haven at the moment,” he said.

The metal plunged as much as 20 percent in the three weeks through Sept. 26 as investors sold to cover their losses elsewhere, before rebounding as much as 18 percent in the following six weeks. The September plunge halted at the metal’s 200-day moving average. Two days ago, gold closed below that measure for the first time since January 2009.

Gold Rally

That move means prices may tumble to $1,400 “in a hurry,” said Dave Lutz, head of exchange-traded-fund trading and strategy at Stifel Nicolaus & Co. in Baltimore. Gold may drop to $1,550 before rallying to as high as $2,400 in the second half of next year, Citigroup Inc.’s CitiFX Technicals predicted in a report Dec. 14.

The plunge may spur more buying from central banks, who are expanding reserves for the first time in a generation, and put a “floor” on prices, said Day of Adrian Day Asset Management. The World Gold Council expects central banks to buy as much as 450 tons this year. Official holdings stand at 30,708 tons, data from the London-based council show.

The metal should rally in the second half of next year “given the turmoil in Europe,” Bank of America wrote in a note yesterday, predicting bullion will reach $2,000 in 12 months.

Twelve of 24 traders and analysts surveyed by Bloomberg expect copper to fall next week. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, declined 23 percent to $7,384 a ton this year.

Sugar Slumps

Raw sugar retreated 28 percent this year to 23 cents a pound on ICE Futures U.S. in New York. Six of 10 people surveyed expect prices to drop next week.

Nine of 21 anticipate a gain in corn, with four neutral, while the same number said soybeans will rise. Corn slipped 7.8 percent to $5.7975 a bushel in Chicago this year, and soybeans slid 20 percent to $11.2575 a bushel.

“Stock markets are going down, the euro zone is going into recession, China is slowing down, you’ve got a million reasons to go underweight commodities,” said Jesper Dannesboe, an analyst at Societe Generale SA in London. “It may bottom out in the first quarter. You’re going to see quantitative easing and that will stabilize the markets. There’s not going to be a big bull market, but it will help stabilize.”

Gold survey results: Bullish: 10 Bearish: 8 Hold: 3
Copper survey results: Bullish: 10 Bearish: 12 Hold: 2
Corn survey results: Bullish: 9 Bearish: 8 Hold: 4
Soybean survey results: Bullish: 9 Bearish: 8 Hold: 4
Raw sugar survey results: Bullish: 3 Bearish: 6 Hold: 1
White sugar survey results: Bullish: 2 Bearish: 7 Hold: 1
White sugar premium results: Widen: 2 Narrow: 4 Neutral: 4 

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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RIM Tumbles After BlackBerry Reschedule

By Hugo Miller - Dec 16, 2011 9:44 PM GMT+0700
Enlarge image

A Research In Motion Ltd. (RIM) BlackBerry smartphone, right, is displayed next to the company's new PlayBook tablet computer. RIM fell as low as $13.88 in late trading after the announcement, which accompanied its third-quarter earnings results. Photographer: David Paul Morris/Bloomberg

Research In Motion Ltd. (RIM) fell to the lowest level in almost eight years after saying a new generation of BlackBerrys designed to fuel a comeback won’t be out until the “latter part” of 2012.

The smartphone maker, which originally planned to release the new devices in the first quarter of next year, also gave a sales and profit forecast that missed analysts’ estimates.

The delay adds to the challenges at RIM, which has lost market share to Apple Inc. (AAPL)’s iPhone and Android phones. The company also flubbed its entry into the tablet market, with a device that bombed with shoppers. After all that, investors may not trust the new target for the upgraded BlackBerrys, said Alkesh Shah, an analyst at Evercore Partners Inc. (EVR)

“Given the misexecution they’ve had recently, it’s hard to use that as a solid deadline,” said the New York-based analyst, who has an “equal weight” rating on RIM shares. “Let’s say it’s a year from now, my concern is that it may be too late.”

RIM shares fell as much as 13 percent to $13.12, its lowest since January 2004 and was 12 percent lower at $13.39 at 9:38 a.m. New York time. The stock had already dropped 74 percent this year before today.

Tim Long, a BMO Capital Markets analyst, and James Cordwell, an Atlantic Equities analyst, both cut their ratings on the stock.

RIM forecast profit of 80 cents to 95 cents a share for the fiscal fourth quarter, which ends on March 3. Sales will be $4.6 billion to $4.9 billion, the Waterloo, Ontario-based company said. Analysts had projected profit of $1.08 a share and revenue of $4.85 billion, according to Bloomberg data.

BB10 Software

The PlayBook tablet computer, released in April, was the first device built on RIM’s new operating system, called BB10. The product’s weak sales, along with marketing missteps, have made investors skeptical about the broader upgrade, said Colin Gillis, an analyst at BGC Partners in New York.

“Why should we think the platform is going to get traction?” he said.

RIM drew criticism for introducing the PlayBook without e- mail, a shortcoming it said it would address over the summer. Then the company said in October that the PlayBook e-mail upgrade wouldn’t come until February.

The fourth-quarter forecast suggests consumers are already losing interest in the most recent BlackBerry 7 phones, which use the previous operating system, Shah said.

“BlackBerry 7 devices have already peaked in interest,” he said. “The concern will be: When do the BlackBerry 10 devices come out? We have no specific target date for that, and my concern is that by the time they come out, it won’t be enough.”

‘Particularly Weak’

RIM co-Chief Executive Officer Jim Balsillie said on a conference call that he’s not satisfied with the “particularly weak” performance in the U.S., which accounts for about a quarter of revenue.

“The last few quarters have been some of the most trying in the recent history of the company,” Balsillie said. The two co-CEOs will be cutting their salaries to one dollar effective immediately as they embark on a review of RIM’s product portfolio, manufacturing and research strategy, he said.

The BB10 phones were delayed because the company wanted to deliver devices with better performance and battery life, said Mike Lazaridis, the other CEO. The chipsets that will allow those capabilities won’t be available until mid-2012. “We ask for your patience and confidence,” Lazaridis said.

Jaguar Financial Corp. (JFC), a Toronto-based investment firm, reiterated its call for RIM to split into separate companies -- or seek a buyer and shake up its management. Investors holding 8 percent of RIM shares support the effort, the firm has said.

The Right Stuff?

Jaguar appealed to board members Barbara Stymiest and Roger Martin to lead efforts to split the role of chairman and CEO. Balsillie and Lazaridis also serve as co-chairmen of RIM.

Lazaridis and Balsillie didn’t discuss any plans for management or leadership changes during the conference call.

“We continue to believe that RIM has the right set of strengths and capabilities to maintain a leading role in the mobile communications industry,” they said in the earnings statement.

RIM’s U.S. market share sank to 9.2 percent in the third quarter from 24 percent a year earlier, according to research firm Canalys. HTC and Samsung (005930), which use Google Inc. (GOOG)’s Android software, both posted gains. HTC rose 24 percent from 14 percent, while Samsung climbed to 21 percent from 14 percent.

Profit Decline

RIM’s third-quarter net income plunged 71 percent to $265 million, or 51 cents a share, from $911 million, or $1.74, a year earlier. Sales fell about 6 percent to $5.17 billion.

Total BlackBerry shipments this quarter will be about 11 million to 12 million, RIM said. Analysts had projected 12.8 million units, according to Bloomberg data.

“The reason they are losing share in the U.S. is they don’t have an ecosystem,” said Sameet Kanade, a Northern Securities Inc. analyst in Toronto, who rates RIM a “speculative buy.” Apple and Google have an army of developers and hundreds of thousands of applications, helping keep users loyal. RIM, meanwhile, is focused on hardware, Kanade said.

“If their entire strategy is a hardware upgrade, where is your strategy for an ecosystem like Apple?” he said.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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European Stocks Swing Between Gains, Losses; Carmakers Drop, Miners Climb

By Corinne Gretler - Dec 16, 2011 10:19 PM GMT+0700

European stocks swung between gains and losses as Standard & Poor’s said the region’s economies may see a larger contraction in 2012, offsetting a report that showed U.S. inflation remains in check.

PSA Peugeot Citroen and Fiat SpA led a gauge of European (SXXP) carmakers lower. Man Group Plc (EMG), the world’s largest hedge fund, fell 3 percent after Deutsche Bank AG recommended selling the stock. Kazakhmys Plc (KAZ) and Antofagasta Plc (ANTO) led mining shares higher, both jumping at least 3 percent.

The benchmark Stoxx Europe 600 Index gained 0.1 percent to 235.01 at 3:18 p.m. in London. The gauge is still headed for a weekly loss of 2.3 percent on concern euro-area policy makers are struggling to contain the region’s debt crisis.

The cost of living in the U.S. stagnated in November as gasoline prices dropped, supporting the Federal Reserve’s view that inflation remains in check.

“The core rates have climbed, but they’re still in a range in which the American central bank doesn’t see a need for immediate action,” Viola Stork, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in an e-mail.

The unchanged reading in the consumer-price index last month followed a 0.1 percent decline the prior month, a report from the Labor Department showed today in Washington. That compares with a 0.1 percent increase forecast in a Bloomberg News survey of 82 economists. So-called core prices, which exclude food and energy costs, rose 0.2 percent, more than forecast, reflecting higher medical care and clothing costs.

Chance of Recession

Stocks erased gains after the S&P said the Netherlands, Germany, Belgium, Austria and Finland may see their gross domestic products suffering larger contraction next year. The austerity measures adopted across the euro region will imply that there won’t be any fiscal support for growth, it said.

In Italy, Prime Minister Mario Monti’s government won a confidence vote in Parliament on a 30 billion-euro ($39 billion) emergency budget plan aimed at spurring growth and cutting the euro-area’s second-biggest debt. A final vote will be held in the lower house at 7:30 p.m., and then the package will pass to the Senate, which will decide on it on Dec. 23.

National benchmark indexes fell in 8 of the 18 western- European markets. France’s CAC 40 lost 0.4 percent, Germany’s DAX was little changed and the U.K. FTSE 100 advanced 0.5 percent.

Carmakers Decline

Peugeot dropped 0.9 percent to 11.91 euros and Fiat SpA (F) declined 1.8 percent to 3.46 euros, after the two companies led the biggest decline in European car sales in five months. Michelin & Cie., the world’s second-largest tire maker, lost 3.1 percent to 42.85 euros. Faurecia (EO) SA, Europe’s biggest maker of car interiors, retreated 2.5 percent to 13.14 euros.

Registrations in November fell 3 percent to 1.07 million vehicles from 1.10 million a year earlier, the biggest decline since June, the Brussels-based European Automobile Manufacturers Association, or ACEA, said today.

Man Group slid 3 percent to 129.5 pence after Deutsche Bank cut the stock to “sell” from “buy.”

Essar Energy Plc (ESSR) slumped 5 percent to 184 pence, its lowest price since its listing in May 2010. Etablissements Maurel & Prom SA retreated 3.5 percent to 11.29 euros. Credit Suisse Group AG analysts led by Edward Westlake cut their price estimates for European integrated oil companies, citing “challenging” downstream business environment.

SAP, Commodity Shares

SAP AG (SAP) lost 1.7 percent to 42.60 euros. The Financial Times Deutschland reported that the software maker doesn’t plan any major acquisitions after the takeover of SuccessFactors Inc., which was the company’s “big purchase.” The newspaper cited Bill McDermott, SAP’s co-chief executive officer.

Xstrata Plc (XTA) gained 3.2 percent to 978.5 pence and Kazakhmys added 3.8 percent to 879 pence as copper and other base metals rose on the London Metal Exchange. Antofagasta jumped 3.4 percent to 1,168 pence. Rio Tinto Group Plc, the world’s second- biggest mining company, climbed 2.5 percent to 3,104.5 pence.

Klepierre (LI) SA, Europe’s second-largest shopping-center owner, increased 6.2 percent to 20.69 euros after Chief Executive Officer Laurent Morel said he expects a “good Christmas” for his company, and this may make up for a second half of 2011 that hasn’t been as strong as the first half.

Lanxess AG (LXS), the German chemical maker spun off from Bayer AG in 2005, rose 2.8 percent to 37.32 euros after Morgan Stanley raised the shares to “overweight” from “equal weight.”

Petroleum Geo-Services ASA (PGS), the world’s third-biggest surveyor of oil and gas fields, rallied 7.5 percent to 58.75 kroner after it predicted earnings before interest, taxes, depreciation and amortization will rise to the range of $650 million to $700 million in 2012.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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U.S. Stocks Advance Amid Crisis Optimism

By Whitney Kisling - Dec 16, 2011 10:05 PM GMT+0700

U.S. stocks rose, paring a weekly decline for the Standard & Poor’s 500 Index (SPX), amid optimism the European Union will meet a Dec. 19 deadline for funding a crisis-fighting package.

Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. (FCX) climbed at least 1 percent after base metals advanced. Citigroup Inc. (C) and Bank of America Corp. (BAC) each added 1.8 percent, leading a rally in financial shares. Research In Motion Ltd. (RIM) dropped 11 percent as the company delayed the release of a new generation of BlackBerry devices.

The S&P 500 rose 1.1 percent to 1,228.67 at 10:03 a.m. New York time. The benchmark index rose 0.3 percent yesterday after slipping 3.5 percent during the previous three days. The Dow Jones Industrial Average added 77.92 points, or 0.7 percent, to 11,946.73 today.

“Things got so oversold with three downer days,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a telephone interview. His firm manages $300 billion. “There are lots of reasons to be bearish, only the U.S. data has been somewhat upbeat. It’s just equities pretty much across the board are pretty cheap.”

The S&P 500 is down 2.2 percent this week after posting its first back-to-back weekly gain since October. The index slumped on Dec. 13 after the Federal Reserve refrained from taking new actions to bolster growth. The central bank said the U.S. economy is maintaining its expansion even as the global economy slows. U.S. stocks rose yesterday after reports on jobless claims and manufacturing boosted confidence in the world’s largest economy.

Options Expirations

Today is the expiration of futures and options contracts on indexes and individual stocks, an event known as quadruple witching, which occurs once every three months.

The S&P 500 is trading for 12.8 times reported earnings, 22 percent lower than the six-decade average of 16.4, according to data compiled by Bloomberg. American companies have topped Wall Street profit estimates for 11 straight quarters.

Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said the European Union should meet an informal Dec. 19 deadline for arranging loans to the International Monetary Fund as part of a crisis-fighting package. Germany’s Bundesbank said it sees “no urgent need” to reach a decision.

S&P said today the Netherlands, Germany, Belgium, Austria and Finland may suffer larger contractions of their gross domestic product next year, adding to concerns about the global economy.

Standing By

Fed Bank of New York President William C. Dudley in prepared testimony reiterated the central bank isn’t planning to undertake additional steps to curtail the impact of Europe’s debt crisis, while standing by to boost liquidity if necessary.

U.S. stocks maintained gains earlier after a report showed the cost of living stagnated in November, supporting the Fed’s view that inflation remains in check. The unchanged reading in the consumer-price index followed a 0.1 percent decline the prior month, the Labor Department said. Core prices, which exclude food and energy costs, rose 0.2 percent, more than forecast, reflecting higher medical care and clothing costs.

Alcoa (AA), the largest U.S. aluminum producer, advanced 1 percent to $8.87. Freeport-McMoRan, the biggest publicly traded copper producer, gained 1.3 percent to $37.33.

Copper led base metals higher on the London Metal Exchange as yesterday’s economic data continued to ease concerns that the global economic recovery is at risk. Energy and material shares have lost the most of the 10 S&P 500 industries (SPXL1) so far in December, falling at least 4.5 percent, according to data compiled by Bloomberg.

‘Powerful Impetus’

“Yesterday’s economic data already have a hint that fortunes could turn more positive for industrial metals in 2012,” Tobias Merath, head of global commodity research at Credit Suisse AG, wrote in a report today. “When economic growth stabilizes, this could deliver a powerful impetus.”

S&P 500 financial companies climbed 1.3 percent after erasing a rally yesterday. Citigroup rose 1.8 percent to $26.37, while Bank of America added 1.8 percent to $5.36.

RIM (RIMM) dropped 11 percent to $13.46 after saying a new generation of BlackBerrys designed to fuel a comeback won’t be out until the “latter part” of 2012. The smartphone maker, which originally planned to release the new devices in the first quarter of next year, also gave sales and profit forecasts that missed analysts’ estimates.

Cablevision Systems Corp. (CVC) tumbled 14 percent to $12.01. The U.S. cable-television provider’s chief operating officer, Tom Rutledge, will step down this month for undisclosed reasons, in what Craig Moffett, an analyst at Sanford C. Bernstein & Co., calls a “staggering loss” for the company.

Zynga Inc., the largest maker of games for Facebook Inc.’s website, raised $1 billion in its initial public offering, pricing the shares at the top of the marketed range.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Europe’s Crisis May Hold Seeds of Dealmaking

By Matthew Campbell and Jacqueline Simmons - Dec 16, 2011 7:40 PM GMT+0700

Play Video

Dec. 16 (Bloomberg) -- Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, talks about the European sovereign-debt crisis and global economy outlook. Gurria, speaking with Sara Eisen and Erik Schatzker on Bloomberg Television's "InsideTrack," also discusses China's monetary policy and the U.S. fiscal deficit.(Source: Bloomberg)

Play Video

Dec. 16 (Bloomberg) -- Jim Millstein, chairman and chief executive officer of Millstein & Co. and former chief restructuring officer at the U.S. Treasury, talks about possible solutions to aid Europe's banks amid the region's debt crisis. He speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

U.S. and Asian companies seeking acquisitions in Europe may accelerate dealmaking next year after a slowdown in the second half, beckoned by a slumping euro and share prices depressed by the sovereign debt crisis.

Led by Johnson & Johnson’s $21.3 billion bid for Switzerland’s Synthes Inc. (SYST), announced takeovers in Europe by overseas companies rose by about 58 percent to $252 billion this year, data compiled by Bloomberg show. While acquisitions have declined since July, companies including General Electric Co. (GE), China’s HNA Group Co., and Japan’s Fast Retailing Co. (9983) have signaled an appetite for further takeovers in the region.

“There are well-positioned acquirers globally looking for bargains,” even if economic pressure has slowed recent European dealmaking, said Gregg Lemkau, head of mergers and acquisitions for Europe, the Middle East, Africa and Asia-Pacific at Goldman Sachs Group Inc. (GS) “One of the drivers in Europe has been historically low valuations and a relatively soft currency.”

Europe may offer the best bargains in more than 15 years. The MSCI Europe Index, a measure of 450 stocks, trades (MXEU) for 10.4 times reported earnings, showing equities in the region are cheaper than they’ve been 98 percent of the time since 1995, according to Bloomberg data.

The euro, meanwhile, has fallen by about 13 percent against the dollar since the sovereign debt crisis began two years ago, making conditions even more favorable for U.S. buyers. Potential Japanese acquirers have the advantage of a yen that has gained about 10 percent in the past six months against a benchmark basket of currencies including the euro.

Acquiring Technology

While few companies are clamoring for access to the European market itself, “in many cases, what overseas buyers are really acquiring in Europe is technology, or access to emerging markets,” said Giuseppe Monarchi, head of European M&A at Credit Suisse Group AG.

J&J’s planned purchase of Synthes will give the U.S. health-care products maker devices used to treat bone fractures and trauma, while Hewlett-Packard Co. (HPQ)’s $10.3 billion takeover of the U.K.’s Autonomy Corp. in November handed it data-sifting enterprise search technology helpful to cloud computing. In buying Luxembourg-based Skype Technologies SA for $8.5 billion in October, Microsoft Corp. (MSFT) absorbed the world’s biggest provider of Internet telephone service.

Emerging Markets

European companies have also tended to be more aggressive than their U.S. counterparts in expanding in markets like Africa and the Middle East, spending about $90 billion on deals in those regions since 2000, Bloomberg data show. That compares with about $50 billion of such takeovers by U.S. companies.

So far, access to those markets and technologies mean many European targets are still worth having. However, a protracted slowdown and a failure by European policy makers to resolve their fiscal challenges may damp the outlook for dealmaking.

A degree of reluctance to do deals will “likely persist until there’s some resolution to the debt crisis,” said Goldman Sachs’s Lemkau. “The interest is still there, but the volatility and uncertainty in the markets makes the likelihood of most acquirers taking action low.”

Moody’s Investors Service said Dec. 12 it will review the ratings of all European Union countries after a summit last week in Brussels failed to produce “decisive policy measures” to end the region’s debt crisis. Standard & Poor’s placed the ratings of 15 euro nations on review for possible downgrade on Dec. 5.

Slowing Pace

Dealmaking in Europe declined in the second half to the slowest pace since 2008, with foreign buyers announcing $86 billion of acquisitions, 48 percent less than in the first half, Bloomberg data show.

Still, many companies have recently expressed an interest in Europe. General Electric, based in Fairfield, Connecticut, said in November it’s targeting European deals as it seeks to compete with German rival Siemens AG. (SIE) Fast Retailing, owner of the Uniqlo fashion brand, is seeking European targets to offset stagnant sales at home, Chief Executive Officer Tadashi Yanai said last month. HNA, meanwhile, has said it has a $6 billion war chest for acquisitions in Europe and the U.S.

There were more than $8 billion in takeovers announced globally today, including New York-based Apollo Global Management LLC’s agreement to acquire Belgian chemical producer Taminco Group Holdings from CVC Capital Partners Ltd. for about 1.1 billion euros ($1.4 billion), the data show.

Cash Stashes

“The U.S. went into recession earlier than Europe and came out of it faster,” said David Silver, head of European investment banking at Milwaukee-based Robert W. Baird, which typically focuses on deals valued at as much as $1 billion. “American companies are armed with stronger balance sheets and want to deploy capital.”

A study of 258 U.S. corporations by JPMorgan Chase & Co. (JPM), published in September, found they held $368 billion abroad, roughly half of their total cash, cash equivalents or investments. Microsoft and Hewlett-Packard both cited a need to find a healthy return on their cash held overseas when announcing their takeovers of Skype and Autonomy, respectively, earlier this year.

`Getting Serious'

U.S. companies may face competition from Asian acquirers, who have announced about $72 billion of takeovers in Europe so far this year, up 42 percent from the same period a year ago, according to Bloomberg data. Japanese acquirers led dealmaking, more than doubling their purchases to $34 billion.

“Japanese companies are getting serious about acquisitions abroad,” said Hernan Cristerna, head of M&A for Europe, the Middle East and Africa at JPMorgan in London.

Takeda Pharmaceutical Co. (4502)’s $13.7 billion takeover of Nycomed ASA, a Norwegian supplier of pharmaceuticals, was the biggest acquisition by an Asian buyer in Europe. More recently, Suntory Holdings Ltd. entered talks to buy bottled-water assets from France’s Danone SA (BN), people familiar with the matter said in October.

On the whole, a bleak economic outlook hasn’t changed the fundamental attractiveness of at least some European companies, dealmakers say.

“International companies are stepping up their focus on Europe,” said Jean-Baptiste Charlet, head of global industries for Europe, the Middle East and Africa at Morgan Stanley. (MS) “The euro crisis still scares them, but there’s a lot of technology to be gleaned and the companies here are very well-developed internationally.”

To contact the reporters on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net; Jacqueline Simmons in Paris at jackiem@bloomberg.net

To contact the editors responsible for this story: Katherine Snyder at ksnyder@bloomberg.net; Chris V. Nicholson at cnicholson22@bloomberg.net

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Republicans Spar Over Credentials at Debate

By John McCormick and Kristin Jensen - Dec 16, 2011 12:52 PM GMT+0700

Newt Gingrich sought to defend his front-runner status in the Republican presidential race as his rivals, led by Michele Bachmann, questioned his electability and record in the final debate before the Iowa caucuses.

Mitt Romney, Gingrich’s chief rival who has been trying to stop his momentum, eased off charges he leveled against the former U.S. House speaker and argued his business background gives him the best chance to beat President Barack Obama in 2012.

Bachmann, a Minnesota congresswoman who needs a strong showing in the Jan. 3 caucuses that start the nomination process to remain viable, asserted herself as Gingrich’s most aggressive attacker in the debate last night in Sioux City, Iowa.

Saying he had sold his influence, she criticized Gingrich for the $1.6 million in consulting fees he received after leaving Congress from Freddie Mac, the government-backed mortgage company.

“We can’t have as our nominee for the Republican Party someone who continues to stand for Freddie Mac and Fannie Mae,” she said, referring to a second government-backed mortgage company. “They need to be shut down, not built up.”

Gingrich, who said he now advocates breaking up the two companies, insisted his work involved no lobbying while defending his fees as legitimate compensation for a private business person.

‘Factually Not True’

“What she just said is factually not true,” he said of Bachmann’s attacks. “I never lobbied under any circumstance.”

Bachmann, 55, also said Gingrich, 68, hasn’t taken strong enough anti-abortion stances to be the Republican nominee. She focused her criticism on his stated willingness while a congressional leader to campaign for Republicans who supported what she called the “barbaric” procedure of partial-birth abortion.

“The Republican Party can’t get the issue of life wrong,” she said. “This is a seminal issue.”

Gingrich said his anti-abortion voting record was close to 100 percent during his 20 years as a House member. He also said that, while he was opposed to partial-birth abortion, he hadn’t been in the business of trying to decide which members of his party to “purge.”

As he again accused Bachmann of getting her facts wrong, he drew a rebuke from her.

Serious Candidate

“I think it’s outrageous to continue to say over and over through the debates that I don’t have my facts right,” she said. “I’m a serious candidate for president of the United States and my facts are accurate.”

Gingrich at the start of the two-hour debate was called upon to defend his conservative credentials, which have been questioned by his opponents as he has risen in polls during the last month.

He defended himself by saying “it’s sort of laughable to suggest that somebody who campaigned with Ronald Reagan” and “had a 30-year record of conservatism is somehow not a conservative.”

Romney, 64, a former Massachusetts governor and business executive, argued that his decades of experience in the private sector would help him debate Obama next year and sought to use to his advantage an attack by Gingrich in recent days.

Lost Jobs

Gingrich had said Romney, co-founder of the Boston-based private-equity fund Bain Capital LLC, made part of his fortune through moves that destroyed jobs.

“The president is going to level the same attack,” Romney said. “He’s going to go after me and say, you know, in businesses that you’ve invested in, they didn’t all succeed. Some failed, some laid people off. And he’ll be absolutely right. But if you look at all the businesses we invested in, over 100 different businesses, they added tens of thousands of jobs.”

U.S. Representative Ron Paul of Texas said he doesn’t think Republicans need to worry too much about electability.

“Anybody up here could probably beat Obama,” Paul said. “I think he’s beating himself.”

Former U.S. Senator Rick Santorum of Pennsylvania took a subtle jab at Gingrich when discussing electability.

“We need someone who is strong in their political and personal life,” said Santorum, 53.

Romney and his wife, Ann, have also started to talk more about their 42-year marriage, an indirect contrast to Gingrich’s three marriages and admission of an extramarital affair.

Abortion Issue

Asked about changes on issues he has made during his political career -- including moving from a supporter of abortion rights to an opponent -- Romney denied he switched views for political reasons.

“Sometimes I was wrong,” he said. “Where I was wrong, I’ve tried to correct myself.”

Paul, 76, said he would be reflecting the will of most voters when he was asked about his concerns that U.S. policy toward Iran is too belligerent.

“I’d be running with the American people because it would be a much better policy,” he said. “It’s another Iraq coming. It’s war propaganda going on.”

That drew fire, again from Bachmann.

“I have never heard a more dangerous answer for American security than the one that we just heard from Ron Paul,” she said to a mixture of cheers and boos. “The reason why I would say that is because we know without a shadow of a doubt that Iran will take a nuclear weapon, they will use it to wipe our ally Israel off the face of the map and they’ve stated they will use it against the United States of America.”

Medicare Plan

Gingrich and Romney praised Republican Representative Paul Ryan of Wisconsin and Democratic Senator Ron Wyden of Oregon for releasing yesterday a bipartisan plan to overhaul Medicare, the government health program for the elderly. The plan would give people turning 65 years old starting in 2022 the ability to choose between the existing system, where the government pays hospital and doctors’ bills for seniors, and an alternative system of regulated private insurance plans.

Gingrich gave Romney credit for suggesting an idea adopted in the plan, and called the proposal “a big step forward.” Romney termed it “an enormous achievement.”

Texas Governor Rick Perry, who has struggled in the previous debates, compared himself with Denver Broncos quarterback Tim Tebow, who faced questions about whether he could play well enough in the National Football League and has amassed a winning record.

“I’m kind of getting where I like these debates,” said Perry, 61. “I hope I am the Tim Tebow of the Iowa caucuses.”

Trust Deficit

Former Utah Governor Jon Huntsman Jr., who isn’t actively campaigning in Iowa while focusing on New Hampshire -- site of the race’s first primary on Jan. 10 -- said the nation has both an economic and trust deficit.

“We are getting screwed as Americans,” said Huntsman, 51.

Bret Baier of Fox News moderated the debate, broadcast live from a convention center in Sioux City. Located in Iowa’s northwest corner, the area has the state’s greatest concentration of registered Republicans.

It was the 13th formal Republican debate this year and is the final session before Iowa’s caucuses. It also could be the last for one or more of the candidates, since poor performances in the caucuses have immediately winnowed the field in the past.

That heightened the pressure for the candidates to use the occasion to maintain or build momentum as they head into a week during which most will be crisscrossing Iowa and seeking support from undecided voters before a quiet period of two or three days in observance of Christmas.

Gingrich Schedule

Gingrich’s campaign has indicated he will spend every day in Iowa from Dec. 27 until the Jan. 3 caucuses. He needs a win to match the expectations that have accompanied his surge in the polls.

Some Republican officials, including some who have dealt with Gingrich over the years, have also raised questions about him. Iowa Governor Terry Branstad, a Republican who has said he isn’t likely to endorse before the caucuses, told the Associated Press yesterday that he has some concerns about Gingrich.

“Whether he has the discipline and the focus, I don’t know,” he said.

Helping shape the race’s storyline this weekend will be an endorsement from the Des Moines Register, Iowa’s largest newspaper. Candidates often use such endorsements in their advertising and they can sway undecided voters.

The paper also is expected to conduct one final Iowa Poll that will offer a snapshot of the race in its closing days.

To contact the reporters on this story: John McCormick in Sioux City, Iowa, at jmccormick16@bloomberg.net; Kristin Jensen in Washington at kjensen@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Adobe Systems, Progress Energy, Research In Motion: U.S. Equity Preview

By Nick Baker - Dec 16, 2011 5:35 AM GMT+0700

Shares of the following companies may have unusual moves in U.S. trading tomorrow. Stock symbols are in parentheses, and prices are as of 5:03 p.m. in New York.

Standard & Poor’s 500 Index futures expiring in March fell 0.1 percent to 1,211.10.

Adobe Systems Inc. (ADBE) gained 3.4 percent to $27.37. The company forecast fiscal first-quarter sales that may top analysts’ estimates amid demand for a new generation of tools that help customers design Web pages and create online video.

New York Times Co. (NYT) : The newspaper publisher said Chief Executive Officer Janet Robinson will retire and Chairman Arthur Sulzberger Jr. will serve as her interim replacement.

Progress Energy Inc. (PGN) : Duke Energy Corp. (DUK) delayed the expected closing of its $16.2 billion takeover of the Raleigh, North Carolina-based utility to March after U.S. regulators rejected its plan to ease competition concerns.

Quiksilver Inc. (ZQK) rose 6.8 percent to $3.28. The outdoor apparel company reported fourth-quarter revenue of $545 million, beating the average analyst estimate of $524.3 million in a Bloomberg survey.

Research In Motion Ltd. (RIM) declined 6.8 percent to $14.10. The maker of the BlackBerry smartphone projected lower sales and profit than analysts had estimated, dragged down by customers switching to Apple Inc.’s iPhone and Android devices.

To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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RIM Forecast Misses Analyst Estimates

By Hugo Miller - Dec 16, 2011 8:08 AM GMT+0700

Research In Motion Ltd. (RIMM) fell as much as 8.3 percent in extended trading after saying a new generation of BlackBerrys designed to fuel a comeback won’t be out until the “latter part” of 2012.

The smartphone maker, which originally planned to release the new devices in the first quarter of next year, also gave a sales and profit forecast that missed analysts’ estimates.

The delay adds to the challenges at RIM, which has lost market share to Apple Inc. (AAPL)’s iPhone and Android phones. The company also flubbed its entry into the tablet market, with a device that bombed with shoppers. After all that, investors may not trust the new target for the upgraded BlackBerrys, said Alkesh Shah, an analyst at Evercore Partners Inc.

“Given the misexecution they’ve had recently, it’s hard to use that as a solid deadline,” said the New York-based analyst, who has an “equalweight” rating on RIM shares. “Let’s say it’s a year from now, my concern is that it may be too late.”

RIM fell as low as $13.88 in late trading after the announcement, which accompanied its third-quarter earnings results. The stock had already dropped 74 percent this year.

RIM forecast profit of 80 cents to 95 cents a share for the fiscal fourth quarter, which ends on March 3. Sales will be $4.6 billion to $4.9 billion, the Waterloo, Ontario-based company said. Analysts had projected profit of $1.08 a share and revenue of $4.85 billion, according to Bloomberg data.

BB10 Software

The PlayBook tablet computer, released in April, was the first device built on RIM’s new operating system, called BB10. The product’s weak sales, along with marketing missteps, have made investors skeptical about the broader upgrade, said Colin Gillis, an analyst at BGC Partners in New York.

“Why should we think the platform is going to get traction?” he said.

RIM drew criticism for introducing the PlayBook without e- mail, a shortcoming it said it would address over the summer. Then the company said in October that the PlayBook e-mail upgrade wouldn’t come until February.

The fourth-quarter forecast suggests consumers are already losing interest in the most recent BlackBerry 7 phones, which use the previous operating system, Shah said.

“BlackBerry 7 devices have already peaked in interest,” he said. “The concern will be: When do the BlackBerry 10 devices come out? We have no specific target date for that, and my concern is that by the time they come out, it won’t be enough.”

‘Particularly Weak’

RIM co-Chief Executive Officer Jim Balsillie said on a conference call that he’s not satisfied with the “particularly weak” performance in the U.S., which accounts for about a quarter of revenue.

“The last few quarters have been some of the most trying in the recent history of the company,” Balsillie said. The two co-CEOs will be cutting their salaries to one dollar effective immediately as they embark on a review of RIM’s product portfolio, manufacturing and research strategy, he said.

The BB10 phones were delayed because the company wanted to deliver devices with better performance and battery life, said Mike Lazaridis, the other CEO. The chipsets that will allow those capabilities won’t be available until mid-2012. “We ask for your patience and confidence,” Lazaridis said.

Jaguar Financial Corp., a Toronto-based investment firm, reiterated its call for RIM to split into separate companies -- or seek a buyer and shake up its management. Investors holding 8 percent of RIM shares support the effort, the firm has said.

The Right Stuff?

Jaguar appealed to board members Barbara Stymiest and Roger Martin to lead efforts to split the role of chairman and CEO. Balsillie and Lazaridis also serve as co-chairmen of RIM.

Lazaridis and Balsillie didn’t discuss any plans for management or leadership changes during the conference call.

“We continue to believe that RIM has the right set of strengths and capabilities to maintain a leading role in the mobile communications industry,” they said in the earnings statement.

RIM’s U.S. market share sank to 9.2 percent in the third quarter from 24 percent a year earlier, according to research firm Canalys. HTC and Samsung, which use Google Inc. (GOOG)’s Android software, both posted gains. HTC rose 24 percent from 14 percent, while Samsung climbed to 21 percent from 14 percent.

RIM’s third-quarter net income plunged 71 percent to $265 million, or 51 cents a share, from $911 million, or $1.74, a year earlier. Sales fell about 6 percent to $5.17 billion.

Total BlackBerry shipments this quarter will be about 11 million to 12 million, RIM said. Analysts had projected 12.8 million units, according to Bloomberg data.

“The reason they are losing share in the U.S. is they don’t have an ecosystem,” said Sameet Kanade, a Northern Securities Inc. analyst in Toronto, who rates RIM a “speculative buy.” Apple and Google have an army of developers and hundreds of thousands of applications, helping keep users loyal. RIM, meanwhile, is focused on hardware, Kanade said.

“If their entire strategy is a hardware upgrade, where is your strategy for an ecosystem like Apple?” he said.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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South Korea Expands Economic Sanctions Against Iran Over Nuclear Program

By Eunkyung Seo and Sungwoo Park - Dec 16, 2011 3:20 PM GMT+0700

South Korea said it will expand sanctions against Iran and cautioned companies against importing petrochemicals as the U.S. leads efforts to pressure the country to reverse its suspected atomic weapons program.

South Korea added 99 Iranian groups and six individuals to a list of people and organizations banned from foreign-exchange transactions without approval from the Bank of Korea, the finance ministry said in a statement today.

The U.S. approved additional curbs on Iran’s banking system and oil industry last month and the European Union added 180 Iranian officials and companies to a blacklist this month. The EU is still discussing a possible halt to purchases of crude oil from Iran, which denies it is seeking technology to build nuclear weapons.

“We will ask domestic companies to pay attention to international sanctions when purchasing petrochemical products from Iran,” Eun Sung Soo, a director-general at the finance ministry, told reporters. South Korean companies should be mindful of sanctions imposed by the U.S. government to avoid souring their business with the world’s biggest economy, he said.

Crude oil imports are not affected by today’s curbs on transactions with Iran. Like Japan, which refrained from restricting crude purchases to its list of additional Iranian sanctions announced last week, South Korea imports all its oil.

Petrochemical Imports

South Korea imported about $333 million of petrochemicals from Iran in 2010, accounting for around 2.5 percent of imports of the products, according to the Korea Petrochemical Industry Association and the Korea International Trade Association. The nation exported about $466 million of petrochemicals to Iran in the same year, or 1.3 percent of sales of these products overseas.

Iran is South Korea’s fourth-largest supplier of crude oil and accounted for 8.3 percent of the 870 million barrels imported in 2010, according to state-run Korea National Oil Corp. The nation depends entirely on imports for oil.

South Korea followed UN sanctions last year banning any new investments in Iranian oil, gas and construction projects. It also put 102 Iranian organizations including Tehran-based Bank Mellat and 24 individuals on a list banning financial transactions without central bank approval.

To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net;

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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Olympus Shares Fall as Takayama Backs Away From Revamp Recommendations

By Mariko Yasu - Dec 16, 2011 12:23 PM GMT+0700

Olympus Corp. (7733) fell after President Shuichi Takayama signaled a planned revamp of management may stop short of demands by some overseas investors.

The Japanese camera maker, reeling from a $1.7 billion accounting fraud, has lost about a quarter of its market value since restating earnings and slashing net assets Dec. 14. Takayama said yesterday he didn’t see a need for the entire board to resign over the cover-up, even after an independent review said they had failed to stop a “rotten” core of managers from hiding losses over more than a decade.

Shareholders including Southeastern Asset Management Inc., the biggest overseas stockholder in Tokyo-based Olympus, have said the entire board must go, along with all executives who were involved in the fraud. Takayama and Michael Woodford, who was fired as chief executive officer after challenging his fellow directors over the accounts, are in a battle for control that will test Japanese shareholders’ appetite to shake up one of the country’s best-known global companies.

While Takayama and Woodford both said yesterday they want to avoid a damaging proxy battle, they also traded barbs. Woodford said Takayama must quit and should play no role in deciding Olympus’s future management. Takayama repeated criticisms of Woodford’s abrasive personality and said it was unlikely management could work with him.

Delisting Threat

Since Woodford questioned inflated fees and takeover costs after he was fired Oct. 14, the company admitted to a 13-year scheme to hide losses and purged some senior executives. It still faces criminal probes, a battle for management control and a TSE review that may yet see it ejected from the world’s second-biggest bourse.

Takayama said that while he was willing to work with Woodford, he won’t meet him until after a separate panel to advise on changes in management reports.

The shares plunged 21 percent yesterday after Olympus took a $1.3 billion reduction in net assets, sparking a cut in the company’s credit rating. The stock fell as much as 11 percent today, before paring losses to trade 3.6 percent lower at 2:20 p.m. in Tokyo.

Takayama said he will consider all options to restore capital, including a tie-up with other companies. Tokyo Stock Exchange rules permit companies to issue new shares to a third party with a dilutive effect of as much as 25 percent without seeking shareholder approval.

Shareholder Vote

Shareholders will vote on new management in March or April, Olympus said yesterday. Takayama said the replacement of the entire board may not be necessary.

“We’ll review our management structure, corporate governance and our business plans as we prepare for the shareholder meeting,” Takayama told reporters in Tokyo. “We’ll be reborn as new Olympus so that we can provide value to all our stakeholders including shareholders, customers, banks and our employees.”

The independent panel set up to investigate the fraud found a culture of “yes men” and a board that failed in its duty to stop a “rotten” core of executives from duping auditors, regulators and investors.

The board unanimously voted to fire Woodford when he challenged the accounting practices. Some board members and senior executives, including the head of the treasury department, Shigemi Sugimoto, signed off on documents that formed part of the fraud and were at yesterday’s press briefing.

Net Assets

Repeated attempts to reach Olympus executives accused of being involved in the schemes have failed.

Olympus’s net assets fell to 46 billion yen ($590 million) as of Sept. 30 from 151 billion yen reported in the previous quarter. That took the ratio to total assets to 4.8 percent, compared with the 44 percent average of 15 global peers in the precision-engineering sector, data compiled by Bloomberg show.

“Equity capital has eroded more than expected,” Tokyo- based Rating & Investment Information Inc. said in a statement announcing its decision to cut Olympus two levels to BBB-, with a view to a further downgrade. The rating is one above non- investment, according to data compiled by Bloomberg. “The possibility of additional losses from a lawsuit and other factors also cannot be ruled out.”

TSE Review

R&I is the only company with a credit rating on Olympus, according to data compiled by Bloomberg.

The TSE removed the company from its watch list for automatic delisting after it filed corrected earnings from fiscal 2006 on Dec. 14. It remains on a separate list for delisting pending a review of the fraud by the exchange.

Olympus stock plunged as much as 81 percent, wiping $7.1 billion off the company’s market value, after Woodford’s dismissal. The shares had recouped about half that loss before their two-day plunge.

Olympus had a net loss of 32 billion yen for the fiscal first-half ended Sept. 30, compared with a revised net income of 3.8 billion yen a year earlier. Revenue was 414.5 billion yen for the six months, from 417.3 billion yen a year earlier.

The company withdrew its earnings forecasts for this fiscal year.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Ben Richardson at brichardson8@bloomberg.net

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RIM Shares Tumble After BlackBerry Reschedule

By Hugo Miller - Dec 16, 2011 6:55 PM GMT+0700

Play Video

Dec. 15 (Bloomberg) -- Brian Modoff, an analyst at Deutsche Bank Securities Inc., talks about the outlook for Research In Motion Ltd. The maker of the BlackBerry smartphone projected lower sales and profit than analysts had estimated, dragged down by customers switching to Apple Inc.’s iPhone and devices that run Google Inc.'s Android software. Modoff speaks with Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Research In Motion Ltd. (RIM) fell to the lowest level in almost eight years in German trading after saying a new generation of BlackBerrys designed to fuel a comeback won’t be out until the “latter part” of 2012.

The smartphone maker, which originally planned to release the new devices in the first quarter of next year, also gave a sales and profit forecast that missed analysts’ estimates.

The delay adds to the challenges at RIM, which has lost market share to Apple Inc. (AAPL)’s iPhone and Android phones. The company also flubbed its entry into the tablet market, with a device that bombed with shoppers. After all that, investors may not trust the new target for the upgraded BlackBerrys, said Alkesh Shah, an analyst at Evercore Partners Inc.

“Given the misexecution they’ve had recently, it’s hard to use that as a solid deadline,” said the New York-based analyst, who has an “equalweight” rating on RIM shares. “Let’s say it’s a year from now, my concern is that it may be too late.”

RIM shares fell 8.7 percent to the equivalent of $13.70 in German trading as of 12:34 p.m. in Frankfurt, the lowest level since January 2004. In New York, the stock yesterday dropped as much as 8.3 percent in extended trading after the announcement, which accompanied its third-quarter earnings results. The stock had already dropped 74 percent this year.

RIM forecast profit of 80 cents to 95 cents a share for the fiscal fourth quarter, which ends on March 3. Sales will be $4.6 billion to $4.9 billion, the Waterloo, Ontario-based company said. Analysts had projected profit of $1.08 a share and revenue of $4.85 billion, according to Bloomberg data.

BB10 Software

The PlayBook tablet computer, released in April, was the first device built on RIM’s new operating system, called BB10. The product’s weak sales, along with marketing missteps, have made investors skeptical about the broader upgrade, said Colin Gillis, an analyst at BGC Partners in New York.

“Why should we think the platform is going to get traction?” he said.

RIM drew criticism for introducing the PlayBook without e- mail, a shortcoming it said it would address over the summer. Then the company said in October that the PlayBook e-mail upgrade wouldn’t come until February.

The fourth-quarter forecast suggests consumers are already losing interest in the most recent BlackBerry 7 phones, which use the previous operating system, Shah said.

“BlackBerry 7 devices have already peaked in interest,” he said. “The concern will be: When do the BlackBerry 10 devices come out? We have no specific target date for that, and my concern is that by the time they come out, it won’t be enough.”

‘Particularly Weak’

RIM co-Chief Executive Officer Jim Balsillie said on a conference call that he’s not satisfied with the “particularly weak” performance in the U.S., which accounts for about a quarter of revenue.

“The last few quarters have been some of the most trying in the recent history of the company,” Balsillie said. The two co-CEOs will be cutting their salaries to one dollar effective immediately as they embark on a review of RIM’s product portfolio, manufacturing and research strategy, he said.

The BB10 phones were delayed because the company wanted to deliver devices with better performance and battery life, said Mike Lazaridis, the other CEO. The chipsets that will allow those capabilities won’t be available until mid-2012. “We ask for your patience and confidence,” Lazaridis said.

Jaguar Financial Corp., a Toronto-based investment firm, reiterated its call for RIM to split into separate companies -- or seek a buyer and shake up its management. Investors holding 8 percent of RIM shares support the effort, the firm has said.

The Right Stuff?

Jaguar appealed to board members Barbara Stymiest and Roger Martin to lead efforts to split the role of chairman and CEO. Balsillie and Lazaridis also serve as co-chairmen of RIM.

Lazaridis and Balsillie didn’t discuss any plans for management or leadership changes during the conference call.

“We continue to believe that RIM has the right set of strengths and capabilities to maintain a leading role in the mobile communications industry,” they said in the earnings statement.

RIM’s U.S. market share sank to 9.2 percent in the third quarter from 24 percent a year earlier, according to research firm Canalys. HTC and Samsung, which use Google Inc. (GOOG)’s Android software, both posted gains. HTC rose 24 percent from 14 percent, while Samsung climbed to 21 percent from 14 percent.

Profit Decline

RIM’s third-quarter net income plunged 71 percent to $265 million, or 51 cents a share, from $911 million, or $1.74, a year earlier. Sales fell about 6 percent to $5.17 billion.

Total BlackBerry shipments this quarter will be about 11 million to 12 million, RIM said. Analysts had projected 12.8 million units, according to Bloomberg data.

“The reason they are losing share in the U.S. is they don’t have an ecosystem,” said Sameet Kanade, a Northern Securities Inc. analyst in Toronto, who rates RIM a “speculative buy.” Apple and Google have an army of developers and hundreds of thousands of applications, helping keep users loyal. RIM, meanwhile, is focused on hardware, Kanade said.

“If their entire strategy is a hardware upgrade, where is your strategy for an ecosystem like Apple?” he said.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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Zynga Raises $1B, Pricing IPO at Top of Range

By Lee Spears and Douglas MacMillan - Dec 16, 2011 12:01 PM GMT+0700

Zynga Inc., the largest maker of games for Facebook Inc.’s website, raised $1 billion in its initial public offering, pricing the shares at the top of the marketed range.

The developer of games such as “CityVille,” “FarmVille” and “Mafia Wars” sold 100 million shares for $10 each, according to data compiled by Bloomberg. Zynga had offered the stock for $8.50 to $10 apiece. It will start trading today on the Nasdaq Stock Market under the symbol ZNGA.

The offering is the biggest by a U.S. Internet company since Google Inc. (GOOG) raised $1.9 billion in its 2004 IPO, Bloomberg data show. The game maker’s increasing ubiquity and expansion prospects appeal to investors, according to Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco.

“Zynga and its games are becoming consumer brands and there is a lot of recognition for growth potential,” he said. “My guess is that the shares will be well-received.”

Founded by Chief Executive Officer Mark Pincus in 2007, Zynga doubled sales to $829 million in the first nine months of 2011. The IPO values Zynga at as much as $7 billion, or 6.8 times revenue in the year through Sept. 30. That’s more than three times rival Electronic Arts Inc. (ERTS)’s price relative to sales over the same period.

Electronic Arts, based in Redwood City, California, bolstered its own online services by purchasing PopCap Games this year. EA, the maker of “The Sims” and “Scrabble” for mobile devices had a market value of $6.9 billion, or about 1.8 times trailing 12-month sales.

‘More Competition’

Nexon Co., a Tokyo-based maker of games for Facebook including “Zombie Misfits,” started trading this week after raising $1.2 billion in an IPO, Japan’s biggest this year.

“You’re definitely going to see more competition” for Zynga as other companies expand their user bases, said Richard Greenfield, an analyst at BTIG LLC in New York. “On the other hand, I think it’s also going to bring more people into the overall social gaming space.”

Zynga planned to offer about 14 percent of its common stock, according to a regulatory filing. That compares with less than 10 percent for companies including Groupon Inc., LinkedIn Corp., and Pandora Media Inc., which made their public debuts this year. Internet companies have used smaller free floats to boost initial demand for their stock, pushing the price higher.

Avalon Ventures, Google

Zynga planned to sell all of the shares in the IPO, and to use net proceeds of about $889 million for game development, marketing and general corporate purposes.

Backers including Avalon Ventures, Foundry Group and Google may trim their stakes if underwriters exercise an over-allotment to buy 15 million additional shares, according to the original terms of the offering. Venture firm Kleiner Perkins Caufield & Byers, Zynga’s biggest shareholder after Pincus, didn’t plan to sell shares in the IPO.

The market value Zynga sought in its IPO was less than a $14.1 billion fair-value estimate of the company’s worth as of August, according to the prospectus. The company settled on a price range after taking into account recent IPOs that underperformed, according to a Dec. 10 filing. Morgan Stanley and Goldman Sachs Group Inc. led Zynga’s offering.

Social Media

Groupon, the Chicago-based provider of online coupons, raised $805 million in its IPO last month, including the over- allotment option. The shares, which surged as much as 31 percent in the first weeks of trading, have since fallen 12 percent from their high.

Angie’s List Inc., the Indianapolis-based operator of a consumer-reviews website, raised $132 million in its IPO last month, including an over-allotment. The stock surged in its first day of trading before falling as much as 11 percent below its offer price.

Both Groupon and Angie’s List are trading above their offer prices. Sixty percent of the Internet or social-media companies that completed U.S. IPOs since 2010 are trading below offer price, Kevin Pleines, an analyst at Birinyi Associates Inc. in Westport, Connecticut, said in a Dec. 13 research note. Buyers of the shares at their opening trade in the public market have lost an average of 32 percent, Pleines said.

Zynga gets more than 90 percent of its revenue from Palo Alto, California-based Facebook, operator of the world’s largest social network. Facebook is examining a $10 billion IPO that would value the company at more than $100 billion, a person with knowledge of the matter said last month.

To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net; Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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Peugeot, Fiat, GM Lead European Car Sales Drop as Regional Economy Stalls

By Alex Webb - Dec 16, 2011 3:23 PM GMT+0700

PSA Peugeot Citroen (UG), Fiat SpA (F) and General Motors Co. (GM) led the biggest decline in European car sales in five months as the region’s economy slipped closer toward a recession.

Registrations in November dropped 3 percent to 1.07 million vehicles from 1.10 million a year earlier, the biggest decline since June, the Brussels-based European Automobile Manufacturers Association, or ACEA, said today in a statement. Eleven-month sales declined 1.1 percent to 12.6 million registrations.

“This minus figure will only get worse in the coming months,” said Hans-Peter Wodniok, a Kronberg, Germany-based analyst at Fairesearch GmbH who recommends buying Peugeot and selling Fiat. Unless carmakers stage production halts in December, “the inventories will be very full, which wouldn’t be good going into a bad 2012.”

Four of the region’s five biggest markets contracted, with France and Italy leading declines at 7.7 percent and 9.2 percent respectively. The European Central Bank cut its 2012 economic- growth forecast for euro countries on Dec. 8 to a range of minus 0.4 percent to plus 1 percent, from plus 0.4 percent to 2.2 percent previously. European manufacturing contracted in November and economic confidence fell.

French Production Cuts

Peugeot and Renault SA (RNO), France’s largest carmakers, are cutting production capacity to reduce inventories. Turin, Italy- based Fiat is working to stem an increase in debt as its domestic car market approaches a 30-year low.

The ACEA compiles figures from European Union member countries plus Switzerland, Norway and Iceland. Western European car sales, which don’t include figures from the nations that have joined the EU since 2004, fell 2.7 percent to 1 million vehicles.

European sales at Paris-based Peugeot, the region’s second- biggest carmaker, dropped 13 percent, while registrations at Fiat declined 12 percent. Detroit-based GM, whose main brands in Europe are Opel and Vauxhall, posted an 11 percent drop. The Detroit-based carmaker said last month that its global sales would be similar to last year’s, with weakness in Europe dragging down the company’s earnings.

U.K., Spanish Declines

Sales in the U.K. and Spain declined, tumbling 4.2 percent and 6.4 percent respectively. Registrations in Germany, Europe’s largest car market with sales that account for almost one in four vehicles delivered in the region, grew 2.6 percent, holding back the gain this year in the country to 9.1 percent.

The end of the property and construction boom, fueled by a speculative bubble and low interest rates during the previous decade, has caused Spain’s unemployment rate to more than double to 22.8 percent. The economy, which stagnated in the third quarter, may contract in the final three months.

Spain’s car market, which peaked in 2007 peak at 1.61 million vehicles, probably won’t top that figure in this decade, according to Jonathon Poskitt, an Oxford, England-based analyst at J.D. Power & Associates.

J.D. Power estimates that industrywide car sales in western Europe will fall to 12.6 million vehicles in 2012 from the 12.8 million deliveries anticipated this year and the 13 million posted in 2010.

Daimler AG, whose Mercedes-Benz division is the world’s third-biggest luxury-vehicle maker after Bayerische Motoren Werke AG (BMW) and Volkswagen AG (VOW)’s Audi division, posted a 6.8 percent European sales drop. Sales at Renault, France’s second-biggest carmaker, fell 1 percent, while those at Ford Motor Co. (F) dropped 5.5 percent.

European sales at Volkswagen, the region’s biggest carmaker, rose 5.8 percent. Wolfsburg, Germany-based VW, which also owns the Skoda and Seat brands, has introduced a new version of the Passat mid-sized car and a revamped Audi A6 sedan in the past year.

BMW increased its European sales 1.1 percent, contributing to the company’s best-ever November global sales total, according to the BMW website. The Munich-based carmaker redesigned its mid-size 5-Series line last year, and sales of the model increased 52 percent globally in November.

To contact the reporter on this story: Alex Webb in Frankfurt at awebb25@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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